So, it was my interpretation that we had all of the ingredients present to us for a nest of ones and twos, which should have led to the most powerful acceleration of the 3rd of the 3rd of the 3rd, but we’re not seeing that yet. And, to the contrary, we’re seeing quite the overnight reversal. Now, it’s still possible that this is a minuette (orange) 2 (I upgraded the wave degrees of this structure after yesterday’s post because of the size of this rally if the degrees now look strange to you), as it is still a 3-wave pattern (we can move the orange 2 over to this new low—if one forms soon), but this doesn’t “look” quite as much like a 2 here now as it did yesterday. It’s not too big to dismiss it either, it’s just that after all the puts that were bought yesterday, I wouldn’t expect us to be here with another drop like this and I don’t want this wave to get too big “in time.”
It seems to me that sentiment here remains especially bearish, but it’s beginning to become bullish now, and this is the wave that everyone is supposed to miss, the wave that runs away from us, and I don’t particularly like a second selloff like this which would let doubting bears get off unscathed and a second chance for people to take longs if they would like to do so. Now, it’s the cash session that matters most and a lot can still happen in two hours, so it’s early to conclude one way or another just yet.
Hmm, so what to do. I am unsure at the moment. I still see a lot of things that suggest to me we need to go up, but we haven’t broken out of the downtrend, and this price action also looks a little threatening to me. Perhaps the jobs report will change things.
I suppose I would have to take a more neutral stance for the moment:
- If we actually ever finally breakout of the orange trend line, I would accept that as a bullish signal—and simply taking out the overnight high without having gone much lower first would do so as well
- But until we actually do those, I suppose that caution remains warranted here.
Are they simply running stops for those who accepted the Amazon (et al) earnings spikes as reason enough to go long and go to bed before they ram it up on the jobs number that they probably already have? I suppose we will find out soon enough.
[UPDATE]: In the graphic above, I typed “loose” faith instead of “lose” faith, which makes me sound like a barbarian, for which I apologize.
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