Today the SP500 broke out above the upper channel line of the short term decline and then pulled back to that channel line. The next likely move is wave [c] of 2 or (B) up to the target. If the time of [c] is equal to [a], the whole thing could be over as soon as tomorrow afternoon. On the other hand wave [b] could extend sideways for some time before wave [c] begins. I will be looking to re-enter index short positions at the target zone. whether it is hit before or after the employment report. It is a low risk entry point against the October 21 high. I will add to those positions on a break of today's low (after the target is hit). Of course, there are myriad ways that wave [b] could go at this point including a retest of Monday's low, but at the moment the pattern looks pretty unambiguous.
Supporting the notion that the rally will continue tomorrow is the positive report after hours by CSCO which is up 1.30 or so after hours. The best of all worlds would be a rally tomorrow followed by a gap up after the employment report on Friday. I will sell such a gap near or above the target zone.
While the 30 minute MACD gave a sell signal today, after a positive divergence buy signal, it is generally prudent to wait for the second sell signal to take a position. We may see a negative divergence buy signal at the wave [c] high (or maybe not, it is not required, just beneficial).
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