Symmetrical Pullback

Markets followed through to the downside yesterday in an orderly fashion equal in magnitude to prior 3-day “symmetrical pullback”. The intermediate and long-term uptrend remain firmly intact, so although pullbacks are expected and even welcome to work off buying excesses, we are not ready to classify recent action as a Change of Character (COC). Further deterioration in price without a significant buy response from bulls over the next several sessions may prove to be the tipping point. Corporate Earnings Releases for 2nd quarter have begun with Alcoa, so money managers are unlikely to make big investment commitments this month.

Yesterday’s Scenario #2 worked out nicely with violation of key support marker (1964), forcing prices down to stated Stat-Xtreme support zone between 1956.25 – 1955.25, with low print at 1953.00 with was the intra-day measured Initial Balance Target #1.

Today’s hypotheses:

Scenario 1: Prior Day High (1967.50)…Likelihood of penetration and conversion are approximately 65% given recent selling pressure. IF this does occur, THEN bulls are indeed firmly in control, with upside targets measuring 1969.00 – 1973 zone.

Scenario 2: With moderate odds high a high penetration, the alternate play will be to look for shorting opportunities on retracement failures near prior session’s Open Range Average (1965.50). Any violation of globex low (1959) increase odds of downtrend continuation which would initially target 1956 .00, THEN Prior Day Low (1953.00). Further violation of PDL measures down to 1948 – 45 Xtremes.

Trade Strategy: We are willing and able to play both sides today (two-sided trade), but want trade placement to be near to key Decision Point (DP) zones to keep risk small and under control.

Remain Flexible…Focus on the Decision Process  ALWAYS USE STOPS!

Good Trading…David

Habitude Six
I am at peace with uncertainty. I know there is no such thing as a sure thing. I have no particular need to be right. I understand that being perfect has no place in trading. I am flexible. I am willing to change my mind. I am alert to scenario changes. I accept the information that tells me I am on the right track or on the wrong track.


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