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here's my write up as far as my observations from the
newsletter, which I will be recording shortly.
Also currently ES futures are up 20
As you know the market has had a nice correction since September
started, which first off historically tends to be a weak month. In
addition the market was too frothy and moving in a 45 degree or
more parabolic move up, which was not sustainable. The market
topped out on Wednesday September 2nd and both Steve and I warned
on the previous few days that we were seeing obviously panic type
buying and to be careful and have some sort of exit plan.
Incidentally on Wednesday, the day of the highs our SPY
reversion to mean system took a rare exhaustion short, which as the
name implies is a system that senses when the market is
historically very overbought in the short term and due for at least
a reversion pullback to the mean. This particular condition
only occurred about 20 times over the last 25 years for example.
Also our new SPX 401K KISS system signaled an exit to cash alert
on Thursday Sept 3rd once the SPX hit the DVT protective stop at
3490, which so far has been a good call.Our QQQ version of the
system also exited on the same day, and as I also showed many of
the major high flying stocks also hit their DVT prices such as
AAPL, TSLA etc. Eventually we'll be offering a lease program on our
KISS charts through
Tradestation.comhowever it is not
ready yet and I will discuss that briefly in today's
Anyway the market has had a nice two week correction with most
of the major indexes and many sector charts and large cap stocks
attempting a bounce near their respective 50 day moving averages.
This correction has been strongest in the QQQ large cap Technology
sector, and this pullback is the largest pullback since the uptrend
began in March for the QQQ, thus representing a symmetry break.
This symmetry break now places higher adds at the next rally
forming some sort of lower high vs going to new highs right away.
For the SPX this pullback too also broke symmetry but only
slight. The largest pullback was in June at 267 points which ended
up forming a b wave lower high, and this currently pullback is 278
points. On the QQQ's you can see the big difference vs the SPX as
the previous largest pullback in the QQQ in June was 18.5 points
and this currently pullback about 34!. So quite a difference vs the
What I'm seeing in the short term:
So regarding the market it's had a nice pullback, however in the
short term the pullback did managed a slight oversold bounce mid
last week which stalled at the 20 day SMA on the SPX, and 9 EMA on
the QQQ before selling back off and making a slightly lower low on
Friday. That said we do have a small zig zag here which could
be labeled as a small abc. On the daily chart there is a slight
positive divergence on the 5 length RSI and we are near some
support from the June highs. Also on the 60 min time frames
the zig zag move last week produced very pronounced MACD divergence
and a wedge like pattern, particularly on the SPX. Therefore
I think the market could be at a spot to bounce from and perhaps
start some sort of larger B wave up that ultimately forms a lower
high before then coming back down in a C or form some other pattern
like a complex triangle or double bottom etc, as corrective
patterns can take many forms. That said the SPX has an open
gap and large support area around the 3280 are and so it's also
possible that price falls further to that zone before attempting a
As far as precious metals they have been in a 1 1/2 month long
consolidation after that parabolic blow off move from early August.
Remember what I said back then, price correction and time
will be needed before the next major up leg resumes.
Currently gold has formed a tight coil, so it's going to
break hard soon one way or another.
As far as trade ideas I did not include any from this newsletter
however I will look for some later tonight and post them on the
trading community blog
ES futures now up 35. Remember I was leaning to an upside
Matt, do you think it's likely to be a breakaway gap?
good question it could be via breakout out of the falling wedge
pattern. If so you should be able to tell by price action,
price should gap and stay strong, not attempt to pullback and fall
back into the wedge
another thing to watch for would be for a trend day
Sorry actually I meant a trend day instead of breakaway gap.
Thanks for details.
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