Today's gap down below yesterday's low should have cleared up which scenario we were in from the get go. The price action today definitely had a wave 3 feel to it. What we'll need to keep in mind as the price pattern matures is whether or not we are looking at a larger impulsive move or another corrective wave.
So far everything is looking impulsive. Of course, all the bears know that one day's sell off can be reversed the next. What I would like to see is this sell off end in a nice clean 5 wave pattern. Certainly the breakaway gap is a nice way to get it going.
I'll be watching both the 8 SMA and 34 SMA on the hourly chart. I don't expect the 34 SMA to be solidly broken until this current wave structure is over. What I would really like to see is the selling pressure to continue tomorrow at the open and push this to the SPX 970 area. That would be a very nice place to end a wave 3 and allow for a normal wave 4 retracement before heading lower.
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Rich
ReplyDeleteWhy do you use 34 SMA on hourly for "support"
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J
The 34 SMA tends to break up the bigger wave patterns. Once price breaks through it, then the previous wave pattern is usually over. Since I don't expect this wave pattern to be over until we hit lower prices, so if we do, then that would put this pattern squarely in the corrective wave patterns, and I would expect at least one more higher high.
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