MARKET IN REVIEW
Courtesy of David at allabouttrends
In our mid-day update Friday we said :
"Part of me would feel safer seeing a retest of recent highs for a mini double top (little red line at 1120 or even the 1131 level before a drop as that would mark a double top at a retest of 1120 and/or a 5th and final wave higher."
So that’s what we want to be on the look out for next week. What to watch for on the long side and where our long side watch list is going to be the focus early next week.
When one looks at the market from the July lows we can clearly see waves 1234 with 5 yet to appear. Key in on are the little pink lines, those are Pullback Off Highs (POH) patterns. They also show up as waves 2 and 4 – where we are now.
This tells us we are not done to the upside yet. Of course this assumes we are going to put in a 5th wave or even a "Back To The Scene Of The Crime" retest of 1120 or 1131. Odds favor that because Friday’s action at the green uptrend line held and we got an upside reaction off of it. Right now, we see no double top or back to the scene retest of 1120 or 1131.
In the what to watch out for department next week:
We’ve talked about the 1120 and 1131 levels numerous times recently. They are our what to watch out for as we’d expect to see some stalling at these levels. If we retest those red lines with failure, we will get very serious on the short side. Same goes for a break of the green uptrend line off the July lows.
In Summary:
Expect more in-flight turbulence on the short side. We’re ok with that but we’ll also want to walk away from a few issues and redeploy on the long side names featured in the long side watch list this weekend.
Also understand that we are in the late innings of this upswing with 4 out of 5 showing. Which means a final push for the 5th wave which probably won’t last long. But we’ll want to capitalize on it via some short term long side trades.
Remember it’s what comes after a 5 waves up sequence. Here’s a hint — Wave 3 is a wonder to behold to the downside. We’ll cross that bridge when we get there though and save it for another conversation.
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