The market (cash S&P500) formed another outside day yesterday. We actually closed higher but the downward price pulse that began from Monday’s high is still in play. The volatility of the day kept the price bar from being a reversal signal – the open being higher than the close creates a bearish real body candle. The higher open yesterday may mean that the entire move down from the October 11th high is an Elliott “Leading Diagonal” pattern. The pop at the open would have been wave 4 in this pattern and the low later in the day the end of wave 5. The Diagonal would be over now – and if so ended at the Fibonacci cluster I’ve been watching (see chart). But yesterday also shows that we made low on the same Gann angle from September 4th as we did on September 25th.
After the opening move higher fizzled we made a new low for the move and I have moved my stop on the open SH trade up to 57.34. As I mentioned in this blog on Tuesday morning, I have been expecting a short-term low Wednesday or Thursday. I think that low may very well be in. What next? A quick pop higher that ends either today or Friday would not be unexpected. We would then resume this move to the downside with eyes still on that Fib cluster around 1497. What I am worried about is my stop placement. With my luck I will be stopped out and then we resume the decline! We’ll see.
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