Decision Time
We ended the day with the Russell 2000 right in the center of a large daily channel, and it also formed a candlestick Doji, ending just about where it started this morning. I think the market is confused. But at least it is forming tradable patterns.
We started with a drop, and then a quadruple reversal. Small gap below yesterday’s close, push up to match yesterday’s high, a move below the opening price, and finally a push to point “A” above yesterdays high, and then the real move down.
I wouldn’t try to trade any of that except for the last move. Notice that it formed a nice Spring pattern just like it did on Tuesday. A new high that can’t hold is usually a tradable move. I would have been more confident if it had happened with a divergence.
At 7:00 we made a bottom at the 78% Fibonacci retracement level, and then moved up for the next five hours. The up move followed one of the normal market patterns. When I start quoting myself, just remember that these are the patterns that can make you money. Here’s what I said Tuesday:
First pullbacks are often around a Fibonacci 62%. Second pullbacks are more likely to be 38%.
There were two good pullbacks in the five hour rise, the first being 62% and the second only reaching 38%. Now if only there were a way of telling when it was going to happen.
As long as I’m quoting myself, yesterday I said:
Although the frequency of occurrence isn’t quite the same, there are Fibonacci time measurements that often hit the same numbers I watch in price.
I mention 127% several times a week, as well as talking about the 100% Measured Move. Taking the distance from point “X” to point “B”, you can see on the chart my default settings for time measurements. The 62% retracement came at the first marker, and the 38% retracement came at the second. I believe it was Gann that said something about reversals happening when time and price come together.
Where did the day’s final top come? If you measure the distance from “A” to “B” and multiply by 127%, you end up at point “C”. To give a second indication that something may happen there, the distance from “X” to “A” is matched by the distance from “B” to “C” — a Measured Move.
A word of warning here. The market has a strong tendency to try fooling the maximum number of traders. Sometimes it does this by repetitive patterns that suddenly disappear. The last several days have really given some nice signals. Don’t be surprised if tomorrow is different.
