Yesterday played out just about as expected. The market fell immediately to the previous Z-pulse low of 1211.54 and then bounced. We then struggled to hold that level through most of the session but surrendered and dropped sharply again into the close, ending a bit below the previous low of the year set on July 15. The negative reversal target from the Composite Index (calculated in yesterday’s post) was satisfied.
Important now is that with price at 1192.70 we are at MAJOR support:
The yearly short moving average is at 1185.33.
The quarterly medium moving average is at 1199.09.
The monthly long moving average is at 1192.43.
And at this area of major support we see the daily chart technicals trying to indicate (but not yet validating) a potential bottom. Note that even though the RSI is at a new low the Composite is above its lows set since September 5.
With price at major support and the technicals indicating a potential bottom we can look to price pulse theory to see what it would take to confirm. A key factor at this time is that on the medium time frame we MUST have a price low by this Thursday. Price action on lower time frames (intermediate and short) must match this; which means we can now look for a trigger to buy. Right now that trigger would be a move in the Delta-pulse above 1255.09. However; if that were to happen, I think we would than likely deeply retrace that move up in the subsequent X-pulse. A safer, longer-term “buy” signal would come when the Y-pulse breaks above the Delta-pulse high.
Step one to a tradable bottom: Watch for technical indicator confirmation of a price low (which must come by Thursday).
Step two: Wait for price pulse theory confirmation.
Until we see both of these steps taken I wouldn’t touch equities.
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