INDU: right back in the chop zone. WLSH: another back test?

Well, from something rotten in Denmark, right back to the smell of roses all in less than 5hrs… Bear market rally!? Over-reaction!? Pure and simple positive divergence!? Who knows. but the FED really had NOTHING new to say. We all knew QE ends this month and we all knew that rates will be held low for a long time. So, here we are, the INDU is right back in the chop zone it has been gyrating around for the last month and a half. What’s up with that!? Leaving everybody confused once more. Yes, this has been one confusing day-trader paradise since September 19, with one day putting in an even bigger candle regardless it being red or green than the previous. How to swing trade that!? Rant over, on to the facts.

The longer term trend line connecting the intermediate d of Major 5 low with the Novermber 2012 intermediate ii of Major 3 low held. We can either count last week’s low as intermediate a down, with Monday’s high as minor a of intermediate b, and today’s low as minor b of intermediate b, or we can can today’s low as intermediate b. A third -bullish- possibility is that intermediate e is subdividing with today’s low as minor b down (3 waves), and the September 19 high was minor a up (3 waves), with the INDU now in minor c up. Bottom line is that we need to look for either 3 waves up (corrective) or 5 waves up, impulse. (click to enlarge)

INDU update 10082014

Looking at the overall market, WLSH5000, is not looking as hot as the 30 stock-INDU. It may again simply try to back-test the lower line of the rising trend channel price has fallen out of. In addition, the WLSH has retraced 99.7% of the previous up move from the August low to the September high. Although this technically still qualifies as a possible wave 2 down (can not retrace more than 100%), it’s as deep as a 2nd wave you’ll ever see IF that’s the case. Odds are, however, and IMHO, that this is NOT a 2nd wave. Instead we’ll now have a euphoric multi-day, 3-wave, b-wave rally that will fall short of the ATH, may come close, and that’s it.

WLSH5 10082014

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6 thoughts on “INDU: right back in the chop zone. WLSH: another back test?

    • Lol! See it as the last struggles. A 5yr bull doesn’t die in one day, that’s why the beginning of a decline is so choppy. Lots of old habit/institutional memory left so to say.

    • hi quinn, i think you misread my post, i am still bearish as I see this as a bear market rally for now, i meant to underscore the difference in sentiment from everybody bearish yesterday to everybody bullish today…

      • ah understood thank you for the clarification. i guess just a difference in time horizons then ie – a bear market rally in a longer down trend, albeit ~50 handles / 2.5% from ~1970 to ~2020 is meaningful. thank you very much!

        • u r welceome. i don’t think it will get to 2020 though. maybe 1990s tops. market waaaay to wild for my taste, i am taking a step back and let things develop. not jumping into any new position for now. Even Cramer doesn’t believe this rally…

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