Key technical features are:
- The fib grid across the high and low of this last rally leg
- The main channel trend lines in red
- The secondary channel trend lines in yellow
- The wedge like triangle trend lines in pink
- The red 20 day MA
- The blue 50 day MA
- The white 200 day MA
What do we see? Well, we continue to roll over across the top - meaning we remain in the secondary channel and more importantly, in a wedging triangle. The triangle tells me that sellers are becoming more anxious than buyers. Note how the bottom triangle trend line is quite parallel to the bottom trend line of the secondary channel - yet the top line of the triangle angling downward. This means that sellers are waiting less time to unload shares on the reaction highs. Very simple, very clear. Buyers on the other hand seem content to pick at the lower line. So this is not 100% bearish, but it is certainly not bullish.
The fact that we have yet to close below the 20day MA is bearish. Every recent rally leg has resulted in a closure below this MA. I would expect a cross of this MA and a close at or below 096 is coming this week. I indicate 096 because this is close to the bottom trend line of the triangle. If we break that line, we could see a reasonable attack of the first the 38% retrace of this rally leg at 083. Failure at this level will likely result in a bump (or cross of the 50 day MA at 081ish. Let's assume an 082 test is in the cards short term.
This is a key level as there is very little support below it until the 072 level - which is the peak of the last rally leg and the 50% retrace level for the present rally leg.
We should not even talk about breaks of the bottom trend line of the main channel until these basic points are reached.
I am shorting all rallies, unless we get a close above the top trend line of the triangle.
Cheers.
6 comments:
Hi David
Interesting that on the daily we have a wedge , on the H we may have an expanding triangle. We can worry about that at down at 80 .
I am a bit confused by today , We went up to finish what I think is a wave C of wave 2. but we wondered out laterally making a double top looking mess on the 5min ,
We started down for what I hoped was the long awaited 3... , Lets say I would have liked to see a break of fri low to, not worry on the strange form on the ?wave2.
I show us still walking up the trend line from 11/02 ,
Maybe forming a down channel at the top from late last week till now . Tuesday one of the other must fail .
Am I missing anything important ?
thanks again
Hey Payline,
It is hard to fit all price action into EWT. Sometimes it can lead to bad assumptions - especially when it is as noisy as it has been in these past sessions. Hence, the closing line chart.
The November 2 reaction low (last in the prior cycle) is in play still. It is part of two trend lines that I am following (major and secondary). It is an eventual test I hope.
As for a down channel - not yet. Stick to the closing line chart, the candlesticks are deceptive. The closing price is all that really matters in situations such as this. We have to break out of the wedge first.
Of course, this is all arbitrary in a way. For me, I can make trading decisions based on my trend lines and resistance lines - you may have your own - and both models could be valid. The proof of course is in the pudding.
My model is telling me that we are coming to a major breaking point. The BBs have started to narrow in on each other (probably should have put that in my post). This means decisions time. The range is becoming more narrow. This is also a sign of tension developing. The tighter the coil, the more energy that it packs.
I can tell you that we avoided a major event today when price action FAILED to break above 1110 during Uncle Ben's speech. Thankfully, the selling was firm - and I think we simply saw some short covering at the firs sign of weakness.
I am shorting the rallies - with caution in the event of an upside breakout from the wedge.
Cheers!
hey david.. if you drew the bottom wedge line connecting the most recent 3 lows doesn't that look bullish with wave 5 completed today setup to break the upper wedge tomorrow? closed my faz right before close and got into fas.. will see what happens but the 60min rsi for the last 3 bottoms is rising indicating a reversal.. who knows.. it all depends where you start to draw the line but whatever i'm doing i'm closing out in a day or two as this may be the last push before the big fall..
..the upward rsi trend is clearer on xlf and i try to use that more than s&p since i trade fas/faz and xlf/s&p haven't been tracking too well lately..
Thanks David , I will say the Day chart look so much not the same as even the H .
Good Luck out there .
Hey Devon,
If you are trading FAS/FAZ then XLF is absolutely the right tracking ETF.
Looking at the SPX - you could connect the last three lows on the daily closing line chart and would of course have a sharper lower trend line. The same could be applied to the last two tops in the daily - you would get a sharper deline.
What is important about your observation is that the market is showing indecision. The tops are getting lower and the bottoms are getting higher. At some point, one force will over power the other force and a break-out or break-down will occur.
Arguments can be made for both bull and bear case - however this is no coin toss! All we can do is step to a higher or lower level to form a sound judgment and risk assesment.
My post from the other night summarizes my bearish outlook for the market. However, there is still some head room here - not a lot, but some. We could get a blow-off top met with heavy selling. This coil is becoming extended and participants are becoming ansy... We'll see.
Thanks for your comments!
Post a Comment