We were expecting a good bounce from 1300 level in S&P and the last 2 days it paid us well....reaching 1328, the index reached the top resistance of the downward sloping trend channel that starts from 1415. The rise from below 1300 could still be a 4th wave, so bears will have another chance to try to break to new lows. Even if a 5th wave is to come, it would be the last one and we should be on the lookout for possible truncation (i.e. double bottom without new low).
Examining closer the move of S&P from the lows we cannot be very confident of a 5 wave move upwards. However one can still see it as an impulse upwards. The decline from 1328 highs is until now in 3 waves. So we can assume that we are in minor wave ii after minor wave i (1291.98-1328.49).
Following the bullish scenario, we observe that with the 3 wave decline, the index has already retraced 50% of the rise. 61.8% is my tolerance level although text book rules mention that wave 1 cannot be retraced 100%. So if you are in favor of the bullish scenario get ready for a 3rd wave upwards. If you feel bearish, one can take advantage of the 4th wave and the expected 5th wave down to new lows or just wait for waves down to finish and then enter long again.
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