Yesterday was an important day in the worldwide markets. There were signs that many important worldwide markets have topped in unison. This is possibly a very powerful indicator that we are at an IT top.
The EUR stocks opened with a gap up, traded above the IT high from last Friday, then reversed and closed at the LOD on volume. Also yesterday the EUR, GBP and CHF all had similar topping patterns. At a minimum I expect these currencies to test the lows set earlier this year. Our own stock market failed to set higher highs than Friday.
As you guys have known I have been expecting a top in the 850-860 area. We have not gotten there, but we got close. Overnight trading on Sunday night reached 848. It is possible that the fifth wave of our fist bear rally leg up will end short. However keep in mind that this is a holiday shortened week. The markets are closed and volume on Wed and Thurs will be light. Because of this it is possible that the mostly retail crowd will push prices into the area I have been expecting.
There is a very good possibility that next Monday's open is down significantly similar to the last threeday weekend we had at MLK day.
Looking forward I still have my target at 750, which is roughly the 50% retrace of the move off the bottom. Just as likely is a 62.8% retrace (732). Less likely is a 38.2% retrace (777). I am reducing the odds for this due to the worldwide market activity yesterday. That was a powerful signal that this correction will be significant, as most wave 2 retraces are. I am also moving up a small notch the possibility that the retrace is 100% or even over 100%. At this point I am only keeping these possibilities in the back of my mind. As prices fall I will get a better indication of where prices are likely to fall to.
The way I am going to play this is similar to the plan I have had in the last few weeks, except that I will not begin scaling out of my shorts until closer to the 750 area, not the 775 area.
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