The market gapped as I speculated on Friday and now we have reached the area I initially pointed out as a target area for a counter rally when the sell off started accelerating last week. And in looking at the wave from 1250, I still see room for a 5th Wave that should carry us to the 1302 or 1312 resistance level. My guess is that we will hit the bearish descending trendline which happen to lie around the resistance areas and then go into a strong sell off to a new low for the year or a corrective wave to test the 1275 or 1288 area to then launch a strong bullish wave. So my strategy will be to short this 5th Wave and see if we go down on a strong sell off or we get to the retracement area in a corrective wave. I originally wanted to short at 1294 or 1302 but given the fact that 1294 was obviously going to be taken out and the market eventually went into a bull flag pattern, I held off and I think tomorrow (or when the 5th wave shows up) will be a better day to short. The market's bearish trendline is intact but if bulls can manage to overcome the key resistance levels then the larger correction will have to wait another month or so.
Also, today I posted an Ichimoku cloud chart. This chart helps identify support and resistance levels which I find very valuable. Right now it shows the market still within the price objective of a counter rally but any higher closes could turn the market bullish again according to this tool.
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