Perspective: As we begin the 4th quarter of 2012, it is important to keep in mind the longer term trend is still up - we have been 1-timeframing higher for the last 3 months. 1406.25 is a key reference as that was last high made before we broke out to the upside on a monthly basis. From the June lows of 1248.50, the S&Ps are up almost 15% for the year.
Looking at the Weekly Bar above, we find that the intermediate trend has turned down as we are 1-timeframing lower. Week ending 9/21 was an Inside week. The low of that week was 1443.50 - and is a key reference as that represents a breakout to the downside from Balance. The next key weekly reference below is 1417.75 - trading below that level and finding acceptance puts us back within the lower 5-week balance.
After 1-timeframing down several sessions, the S&Ps entered the Lower Balance - got rejected as the market got too short - the next auction carried price into the Upper Balance - saw rejection and on Friday delivered an Inside Day i.e. Balance within balance. Price settled a few ticks above the lower balance high of 1433.25. The trading question for Monday is do we stay within Balance or breakout from balance.
The profiles shows a poor high from Thursday - caused by short covering and a poor low on Friday from a market that got too short in the day time frame. If we break to the downside and find acceptance below 1433.25 - the target becomes 1418 area. If we break to the upside and renter the upper balance shown in the daily chart graphic above - the first target would be Thursday's high at 1444.50 and above that 1450 area.
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