The working hypothesis is that the August 2 high marked a significant top. I am quite convinced that it ended the rally from the June 24 low. Does it also mark the end of the trending impulse wave from the November 2012 low? Here are some sage words from blogger/trader Leaf West: “Traders know that calling tops is a mug’s game, and that they should always assume that as price pulls back from a new high, that support will hold in the SLOT and that a new high will be made. It is at the point in time when price bounces from support but fails to break to a new high, where traders can then point to that previous high in price and mark that as a more important top. Price should then be expected to make a bigger wave structure in the opposite direction from that confirmed top.”
In West’s work, the SLOT is the 50-78.6% retracement area which I have drawn as a box on today’s chart. Note that one of the features I track is in that box: The next larger Beta-X trendline. A close beneath this line will raise the chances significantly that the trending impulse pattern from last November is complete.
Other items of interest from the daily chart:
1) RSI (top pane). Two readings below 38 will also point to the August high as completing the pattern from November 2012. The RSI is currently at 35.29; marking the first reading below 38.
2) TDST support (1588). Will it hold?
3) Composite Index (middle pane). This indicator is now at an extreme low. This implies that the “final” low for this decline is not yet in. Expect a bounce followed by lower lows.
Bottom Line: The chart is bearish. Let’s see how it develops over the coming days.
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