So busy... so busy... so busy! No time.. no time... no time!!
Just a quick recap on the smaller timeframe view of this crazy bear market bounce which, with high likelihood, at the very least ended its first stage on Friday.
I haven't been able to post much recently, but my last specific call was on Friday evening, AU time (early Friday morning US time), which was as follows:
Hey y'all, I still haven't had time to do any full postings, but I just wanted to say that I'm seeing a fairly major junction approaching. It's either an ending diagonal which should top in the next day or so (I like the notion of a top during Fridays session followed by a sizable gap down on Monday, similar to what others have suggested... but we'll see) or else this SOB will literally take off into orbit on strong volume. I strongly favour the former scenario, but am keeping these other options in the back of my mind. I am short, and plan to add... if the tape appears to be keeping to the script. I agree with others that the 880 area should contain prices, but ending diagonals are real bastards for shaking out nervous shorts before the drop with some crazy whips.
Good luck all.
URL: http://xtrends.blogspot.com/2009/04/regarding-sentiment.html#comment-8291289
A number of other traders picked up on the ending diagonal/ending wedge idea as well. Kudos, and 'so far, so good'. The volume profile certainly was classic for an ending diagonal. I'd like to see some more convincing volume as it drops, but that's about my only concern with this projection so far.
Checkout a quick chart here:
Trying not to over-think this, the main fact about ED's is that the starting point of the ending diagonal acts as a strong magnet for prices. So with that in mind I'm expecting price to drop to 778 at a minimum.
Obviously if the tape indicates something else is going on in the meantime, then things will need to change... but so far this is a really 'textbook' ED.
As for what I'm thinking over the longer term - I don't really care so much at this stage. My entry was good, and the minimum targets are clear and hopefully Mrs Market will drop some clues about the bigger picture as more time passes.
But if prices are going to make a another bear market bounce run for higher prices, history dictates that price needs to retrace further than 778 if it is to get enough of a springboard in place for higher prices. So I'm fairly confident we'll go quite a ways below 778 on this leg, and as mentioned, will be watching for clues along the way.
I haven't been able to read many comments these days, but the poor (low) volumes on this bear market bounce are really quite interesting. There's talk of a liquidity crisis in some circles. I dunno, but that kind of thing would certainly help drive a capitulation which, as Atilla correctly states, is a precondition for a lasting bottom.
One thing is for certain, this bounce is almost certainly a bear market bounce. It is very hard indeed to find a way to label the bounce as some kind of impulsive bull market kickoff wave. So... there will be lower prices (lower than 666) at some point in the future.
Cheers
JB3
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