Today's move was the selloff I talked about yesterday. A failed bullish setup and a broken trendline brought the sellers in droves. Looking at the above chart, it appears that we are ready to finish our wave 3 tomorrow, and since we are right on key support, it looks like a perfect place for the market to mount a 15-20 point rally for wave 4 along with a possible triangle or flat pattern. I expect the most likely scenario is for an exhaustion gap down tomorrow to finish the pattern. Should we gap up, then for a test of the lows before wave 4 would officially begin.
These two charts are showing some good targets for this first wave 1 to complete. The daily RSI is hitting the area where the bulls have bought the market before, but we need at least a pause day to put the brakes on the RSI as right now there is no divergence or slowing of the chart. Unlike the last moves down, I expect to see divergence on the daily chart before our first wave is completed.
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