As I said in my last post (click here to see it), the market had good odds of reacting and coming back to retest last year’s (May 2011) high. All the signs we look for were there. These are taught in detail in Chart Reading Mastery, and past students were noting these signs and anticipating the reaction. As you can see on tonight’s chart of the weekly and daily S&P 500 Cash Index, the market fell as anticipated and the target zone I noted has been entered.
What’s Next?
We have had five down days in a row. That’s a fair run, and the market is looking a bit over sold. I am expecting some consolidation to come in. Any further push down tomorrow in the morning session will unlikely get very far beyond the 1350 level (maybe 1345 in the futures). The upside at this moment appears limited to around the 1386 level in the cash market, unless we see evidence of buyers stepping in aggressively.
We do see a pickup in downside volume today. Supply is active. If we do consolidate next, we can anticipate further downside, depending on the characteristics of the consolidation.
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