US markets have found support around the January lows. These are valid support zones for this month, however the overall trend based on the Yearly timeframe remains bearish. And any upside moves this or next week are simply counter-trend moves within a larger bearish pattern
The first sign of validation was the bounce from Wednesday daily lows (HOOK), and then the crossover of the 5-day 50% level on Thursday and rally towards the 3-day highs.
A confirmation of the support would be a break of the Friday channel highs (3-day high cycle), with the expectation of a higher Weekly close towards the Weekly 50% level in both markets…..
Whenever the 5-day and 3-day channel come together like this, it gives a forewarning that a potential breakout is likely to happen, However it doesn’t say which direction the breakout will be.
If we subscribe to January support being valid, then the breakout would favor the upside. If it follows the overall bearish trends in the market, there is nothing stopping the market from breaking lower on Friday, and move into another downward close on Friday…
Therefore the 5-day 50% levels in both markets for Friday are going to be extremely important…because it’s going to clearly give traders an idea which direction the market is going….
And there is nothing to suggest that any breakout will happen on Friday either, and both markets consolidate on Friday and close in the middle of the range…
Scenario 1: if it bounces off the Friday 5-day 50% level and breaks higher on Friday then my expectation is that price will move into the Weekly 50% level, but rotate back down next week
Scenario 2: if it breaks Friday’s lows, let the market run it’s course and don’t LONG trade again.
Scenario3: And this is what I want to happen…
Page 63 figure 27 of the book…
A weekly close in the middle of the 5-day range has the potential to move into a ‘Weekly counter-trend’ move upwards (Next Week) :- 'Bottom-to-Top' trading week rising from the 5-day 50% level
There is less chance of a reversal back down if this happens, and there is a potential of a series of days that make higher highs into next Friday….
Let’s see how this Friday plays out…
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