First, this most recent market pullback was, for most people, just another pullback in an ongoing bull market. The only reason I'm claiming it is the start of a new bear market is because of the shape of the chart and most people will liken that to reading chicken bones, etc. I'm not talking about just stupid people here. I'm talking about very intelligent and well educated people. But they might not see that they are more indoctrinated into the system (and thus a tighter part of the herd) than they could ever imagine. Of course, I could also be just wrong. Time will have the final say on that.
My interpretation of the chart says that the 38.2 wasn't enough of a pullback. I think that this bull market has gone on for a couple years now and that people have gotten used to dip-buying working every time (the old "it's worked so far" justification - just like fiat currency and fractional reserve banking). I think this first pull back has to test the resolve of the bears. In addition, look at that open gap on the way up. There is an old TA theory that says all gaps will be filled. I don't think it is right but I think filling that gap as shown would create a nice long C wave down to the 61.8 fib which would also be a backtest of the resistance turned support line. Getting back down close and then shooting upward is how the market communicates that it really has changed direction. So to recap my reasons:
- The shape of the chart
- Gap filling
- 61.8$ fib hit
- Nice long C wave relative to the A wave
- Backtest the RTS line from above
If this doesn't work out I should know pretty early in the trading action.
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