Friday, August 28, 2015

Initial Rebound From the Waterfall Decline Likely Near Complete

Click on Chart to Enlarge

SPY has advanced basically as suggested by previous comparable instances highlighted in recent posts.  And the peak short term gain in the past instances was in the 5-7 day range on a closing basis from last Friday.  So today is day 5.  Additionally, there has been no divergence, even short term at the recent low, suggesting the psychological phase of this downward move is unlikely complete.

Looking at the 15 minute chart above, SPY has been advancing in a rising wedge type of pattern off of Monday's low.  With a poke above yesterday's high, there will be a pronounced bearish divergence on the 15 minute chart which may highlight the end of this initial reaction to the massive sell off.

From previous instances, it seems that a greater than 50% retracement of this week's rally is likely even if the bottom holds for the intermediate term.

I would again re-iterate that any long position be taken off currently in stocks.  Depending upon your time frame, and method for trading, I would suggest that some short-term downside is likely.  I think the gap up from Thursday has to be a minimum target for any short term halt to the uptrend.


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