Although a volatile day, the downward moving price pulse from 1523.57 continues. The cash S&P500 index formed a downtrending day on Wednesday but it wasn’t your orderly type of downtrending day. After an explosive opening that saw the index move to over 1511 (about a Fibonacci 34 points up from yesterday’s close) the bears took charge and sold the market off towards the December 4th pivot low. We then closed up on the day. Volume continued to increase but the facilitation of price declined. This combination is what Bill Williams calls a “Squat” bar. On December 5th I wrote about this type of bar saying “The last time this happened we ended up with a price fractal high on 11/30. Now we should be watching for a low.” In fact, December 4th was the price fractal low. Are we seeing another low made now?
I think the best way to view this is to use the area between 1474 and 1490 (moving averages) as the “decision zone”. We are in that zone now, making a collective decision on whether to move higher or lower. A break upwards above the congestion zone is bullish and vice versa. This congestion zone also contains the neckline of an inverse head and shoulders pattern. As there are no definitive “sell” signals in my technical indicators I have to continue to believe that we will break upwards out of this support zone. I will keep the stop on the SPY Long position at 146.30.
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