with Anthony, ZigZag & Platy
My short trade was marginally stopped out on Friday (4pt loss) so i am looking to re-enter on Monday morning here in Australia. For those who are holding shorts this has been a patient ride. The last CIT day of the 5/6 Dec was a bit of a curveball due to the fact that it was an outside day, high or low, even with these powerful tools the market has a way of keeping us guessing. In hindsight it was a low. With a weekend CIT date of 08 Dec, and also a Mars cycle due on the 9th Sunday (well done to Platy) i think this adds additional weight to the high on Friday. Im going to switch over to the SPDR DIA ETF which tracks the Dow Jones for charting purposes. (SPX and SPY holders dont fret, the highs of the Dec 3 should hold (Another CIT as per the CIT days here).
A couple of things to point out on this chart, we are at an inflection point which is going to define the trend for the rest of the year in my opinion. If we break upwards out of the mid channel line then i would suggest that any future pull backs will be a great opportunity for mid term long positions. But there are a number of barriers which are big enough for me to believe that we are about to head down. Firstly the mid channel line which has geometrically contained this rising trend since the 01 may peak and 4 June low. There is also a 0.618 retrace of the Sep – Nov range just above. The volatility bands are also suggesting that we should pull back from these levels and the stochastics on 3 time frames are overbought suggesting the longer and shorter time frames are “ready” for a move down.
If that wasnt enough lets see if the UUP Dollar PowerShares ETF is confirming the move. This looks to me as if the dollar will complete a minor wave 5 up into late December, then a resumption of the downtrend into 2013. The upper sloping channels have provided historical support and the next upper volatility band test is likely due a the projected channel line sometime in late December which should coincide with an equities low.
The correlation chart courtesy of ZigZag shifted forward a day. The chart is clearly showing bearish tendency down into 21 Dec time frame.
There is always the potential of smaller cycle inversion into the next CIT time frame of 11/12 Dec. This scenario would be on the cards if we take out the high on 3 Dec. However this 3 Dec high remains very strong resistance and in my view intact. An overshoot scenario should be halted at around 1430-1434 which would be the optimum place to go short.