The rectangle (Minuette4) is still in effect until the 5-wave down to new lows occurs. If the 5-wave occurs then M4 ended at the latest rally high. In SP futures this is 1080.75, in cash it is 1082.62. The reason that the cash index charts look like a clear breakout of the rectangle is that the actual lows were recorded overnight and the futures charts tell the story. These long congestion patterns exhaust both bulls and bears, so when they are finished the losing side just gives up to level out positions in a hurry.
The following chart tells 4 stories:
1) The 60-minute M/A has caught up to the high today (blue line)
2) The 30-minute M/A is still in effect until prices rally .5% above it
3) The overnight lows in the rectangle indicate clearly that the breakout has not occurred
4) We have yet to see a 5-wave on the downside
These shake-outs catch almost everyone and are to be expected. The fact that the rectangle has been in effect for so long increases the downside potential.
Thanks for posting your thoughts.
ReplyDeleteBought SSO this morning for the 4th wave bounce and sold after hours for a small profit based on 4th point of your comment. Do you think there will be a bottom tomorrow followed by a high to 1110 on the S&P?
ReplyDeleteLooking only at the cash market, one would be forced to assume that the rectangle breakout was real. Looking at the futures market the rectangle is still unfolding. I have reduced my position based on EWI's STU but am using the 30-minute M/A .5% envelope as my stop for remaining short. STU is wrong a lot. If they are wrong this time I will be mad at myself for allowing them to sway my judgement.
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