When we last left the daily chart (16 August) I thought that we needed to retest demand (the low) again before a sustained bullish rally can get underway. That retest occurred on August 19/22 and was turned out to be successful. As noted yesterday it came in conjunction with a bullish divergence between the RSI and composite index on the weekly chart. Then, after an unqualified break of the daily supply line (downsloping red dashed line) on august 24, we had a qualified break on the 26th which was confirmed yesterday. The magnitude of this supply line break is such that a substantial retracement rally is possible although not necessary.
Also note that yesterday's price action means that an A-B-C pattern may have completed on the daily D-wave chart. Just another reason to respect the bullish potential over the short term.
There have also been developments in the price pulse as the x, y and z pulses have been confirmed complete. In this instance the buy signal matched the supply line already mentioned. With a buy setup in place (on August 9) the confirmed break of the supply line (delta - y trendline) raises the allocation mix meter to +50%.
With that being said, the weekly chart hints that this is only a counter-trend rally. Thus the idea is to identify targets on the daily chart and watch for a reaction and confirming technical signals. Those targets are: The medium (blue) moving average, 1245-1247 fibonacci and Trend Factor targets, the long (green) moving average and TDST resistance at 1332.
Bottom Line: I believe a counter-trend rally is underway. My mechanical allocation mix meter has risen to +50% - the bullish potential over the near term should be respected.
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