A rally to the 50dema is underway in the major indices, most likely in wave c of Minor wave 4 of a flat correction. The move up from this mornings lows was 5 waves on the intraday chart. Look to enter index long positions at a 38% to 50% retracement of today's range with a stop loss somewhere below today's low. The target is the 50dema. The 50dema is declining sharply, and therefore if the rally is also sharp we should see selling and a possible reversal at that moving average. This would be a perfect opportunity for a macd short position should it signal a sell after the 50dema is touched.
I exited all index short positions by the close yesterday and many of my remaining stock short positions around 1pm today. If you are still heavily short, it would be wise to lighten up tomorrow in my opinion as this rally could be intense.
What happens after this rally is over will clearly determine what happens in December, but another move back down to today's lows is certainly a possibility before a 6 to 8 week rally to follow. A breakout without retesting the lows will mean that the intermediate term wave (4) or (A) rally is underway.
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