Summary…There is no question that last evening’s Bear Attack left a technical flesh wound but it was by no means fatal. In hindsight if we had not been in the “rack and sawing wood” at the time we would have several hints that something nasty was brewing. That said we expect that a Counter trend “B” wave rally to develop from what is becoming a short term oversold condition in the range of 15,875 to 16,100. Needless to say our current technical thesis will be wrong and too optimistic if that support zone does not hold.
Detailed Technical Thesis…After failing to overtake resistance at the Upper Parallel of the Schiff Modified Pitchfork or (“SMP”) (P1 through P3 in green) for the third time (yellow circle) prices began to track lower falling below Median Line support (green dotted line) and then support at the top of the Cloud and the Lower Parallel (solid green line) of the “SMP”. The reversal from the pivot high gave birth to a new Standard Pitchfork (P1 through P3 in purple), the Median Line of that Pitchfork (purple dotted line) also was swiftly violated. With these support violations it was clear that a correction of a larger degree was unfolding. The break of support at the bottom of the Cloud, both Warning Lines of the “SMP” (WL1 and WL2, green dashed lines) and the lower Parallel of the newly drawn Standard Pitchfork (solid purple line) as well as the depth of the drawdown certainly confirmed something more than a brief correction was developing.
We had expected that a wave 4 correction in the 5 Wave impulsive rally would eventually unfold and what we have seen in the price action over the past +24 hours has all the earmarks of a developing 4th Wave. The price structure of 4th Waves can take on many different structures and can be drawn out over a long period of time. We expect a tradable “B” Wave rally to develop around the time I wake up after my third plate of turkey, mashed potatoes and gravy but it will only likely be an counter trend move of an “ABC” correction.
There is a measurable amount of price support at the Price Activity Support Band, TDST Support and the Warning Line (WL1 purple dashed line) of the Standard Pitchfork on the 240 min Chart above. There is also support afforded by the Fibonacci confluence of support at 16,100 as noted on the Daily Chart below. We would expect a counter trend rally to find its genesis in that area but for that to come to light the momentum oscillators need to turn.