I said that today was very, very important. Last night, I explained how we were right at the 38% retracement level of the down leg that started this correction. That was 1100. I stated that rejection here would bring a retest of the lows for the year. We got the retest, and then some...
Why is this so darn important? Well it converts a major support level to a major resistance level going forward. Open the following ES chart to see what I mean:
Looking at the Daily chart we see that the 1081 ES (futures) level is now the source of a fair amount of overhang. We traveled a full 20 points beyond to 1060 today and closed at our lows. It is going to take quite a bit of enthusiasm to rally back the 20 points just to get back to the overhang supply. The longer it takes to return to the 1080 level, the enthusiastic the selling of supply will be when we arrive.
You'll notice that we are paused on 1062 - which is our current support level. It corresponds to an old reaction high that occured well before the holiday rally. That reaction high is what supported the futures market with the Dubai scare. We have breached that low already and I suspect the futures are headed all the way to 1022. Why? Take our closing price level and scan back in time on the chart to find where we intersect. First you see dubai low then you see the middle of that very significant rally leg just 15 days earlier. Now locate the base of that very significant rally leg. You get 1022. That is our next target if this trend continues.
Speaking of trends, I think we have an official down channel here. I have illustrated the channel with yellow upper and lower trend lines. This is one heck of a sharp channel with a width of 50 points. Note how today we broke through the lower trend line of the prior up channel. I highlighted that break at the mid-point of today's price action. This was the moment of truth for me, and I am now comfortable that we will not be making new highs anytime soon.
One thing to watch is the major divergence on the 15 minute chart formed between price action and RSI. Most of the day was spent diverging. Look how oversold the condition has gotten. The key is that though we continued to make lower lows, the RSI has risen. We popped out of the oversold condition at the end of the day - yet we continued to make a new low. This is telling me that we are oversold and again price action must either pause or bounce a bit. I'll be watching this carefully. If we pause/bounce, the key is to quickly resume the down move until we touch the lower trend line of the down channel. If we do not, we start to form a falling wedge.
That is the quick review for the day.
Good luck out there!
3 comments:
David , enjoyed you Ta tonite ,
You often talk of feel , Today was about feel , I mean if you just look at the chart , it " looks " better , if today was a w5 and the correction was a W4 , but the Feel was a wave 3 , Feeling of POWER and touch of panic .
Oil , Metals and the $ all had " the feel "
Robert Prechter, on the 15th of Jan wrote , expect this to be like nothing you have seen before , quicker and smaller retraces that you expect , it will but you in awe and downright scare you at times .
Btw , still could not crack a smile watching it today
I am happy I sold my long after hours last night , and that I added to my gold short at 1118 ,
I would have added to my oil short but there was triangle just off the top , and I cant trust my judgment on them yet.
I am stung on 30y bond short , seems to be missing a wave , but I will have to cut and run at a loss on that soon...
My Best for you and everyone
For months I have been patiently waiting, and battered along the way when impatient.
So yesterday was the day I have been eagerly waiting for.... We all were. And it came.
To be off- line all day and night due to Internet malfunction at providers whatever.
i can't believe it. I'm gutted. No trade. Nothing. All week I was selling futures and being stopped out. To be left emptyhanded when the turn came.
However my full shorts on swing did great, I cannot shake this profetical feeling of doing something I am aparently not supposed to do.
Anyway Dave good to see you back at TA, I hope you all can profit from this ongoing? correction.
Paulus,
You and I both seem to have very bad luck with timing! My desk was down for the first leg of this move and cost me quite a bit. The trick is to remain composed and try for the next setup.
Check my post tonight to see what I think is happening out there.
Have a good weekend!
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