This Week’s Price Action
- Price action remains choppy with lower highs and lower lows in the immediate term.
- The above is true in all of the major US indexes
- There are no bullish or bearish technicals in play at this point, so watching the 5 wave move.
The Bottom Line:
Being the end of summer here and trading volume light, I continue to take very neutral posture and don’t see much I have to do just yet. It’s a traders market here..as apposed to the long term holders market we had all year. No matter how I look at it, I see very little to convince me that another lower low isn’t in order as this looks like wave 4 of a 5 wave move into 2400 area of support. The ideal trade for me would be a move higher towards 2470 to short into 2400. That would be the low risk entry I am looking for as the pattern I am seeing right now is the typical 5 wave correction and this being wave 4. I have pretty high conviction that is the way we are headed in the immediate term…but will let price action setup next week to try to take advantage of it. From that point we’ll look for a reversal pattern to trade for a bounce if the price action can improve.
Here are some charts worth watching:
XBI – A dip into 75 area would make a nice right shoulder.
XOP – Getting interesting here above 30.
IWM – lower highs, lower lows.
XLF – The reason to be in the trade was placed under attack but now looks more neutral. Don’t see a compelling reason to dive back in long here…but it looks less like a topping pattern and more like a flag at the moment. Another leg lower would offer a 5th wave.
AAL – we know how bad airlines have gotten crushed, but this could be a low risk entry above last weeks low and those converging vwaps.