Looking for higher, if Monday passes the test

I typically only trade the direction that I believe is most probable. Unfortunately I do not believe it is very clear (in the short term).

For those who don't like to read a summary is below.
Monday is key. If price is held above the inv H&S neckline and ascending triangle support, I am bullish and will buy support.

We generated an inverse head and shoulders type bottom. The geometry is not perfect (slanted upward) but it is normal for patterns to not be perfect.



We had an ascending triangle breakout after 1 month of forming.

We spent about a month creating the ascending triangle where there was 3 days in which price dropped out the bottom. You can see multiple reaction lows and breakout attempts to the upside. Volume during this period was declining with a large volume spike on the breakout. This is exactly what you would expect with such a pattern. No, the pattern does not fit the true definition of an ascending triangle, but the geometry is still a bullish one.

It took approx 1 week to reach the expected target where the rally terminated and price returned to breakout support.

On Thursday as the market sank, so did volume. Volume will come back into the market Monday, and that should tell which direction is correct.



If you view the price action over the last 6-7 weeks as a trading range, price is back near the middle of this trading range.



Monday is key. If price is held above the inv H&S neckline and ascending triangle support, I am bullish and will buy support.

The point is that these are bullish patterns, and one should be buying support not shorting it.

Mondays action should tell us what the correct direction is. If price makes a new 3 day low but price is bought back up above the inverse H&S neckline and above the ascending triangle support, I would expect the trend to continue north. For me price being maintained above these levels is very important.

All IMO...

The bounce on Friday already showed its tail and it will drop back into the box below............ MMs are not playing for a qtr end windows dressing and it's a losing qtr anyhow ............ It's going to be a reverse windows dressing for stocks.

Edited by redfoliage2, 24 June 2012 - 11:48 PM.

What I do know, is that a gap down in the morning is likely to run to the downside. A gap down is nothing to buy on a Monday after the 2 day pattern.

Edited by orange, 25 June 2012 - 02:17 AM.

If 1300 holds today, we may see a rally from there, timing is not clear to me... But I see an 17-18 day cycle, it would target about Wed, I suppose. Nevertheless, 1290-1300 zone should not be lost without a fight. There is the 1280 gap support also... If 1280 gap closes, the entire uptrend is broken and we may only expect a trading range until August or so... The risks would be then both ways, currently I think the risks are slowly weighing to the upside, especially as the market gets closer to the strongest support of the June 4 rally...

The Rut daily cycles actually did not turn down last week, that was a mean regression. RUT daily turns down on Weds-Thurs. Another narrow peak in SPY 195 minute TODAY, Monday might recover back up. It looks like a trick, no one plans on end of month down, every one thinks early down with end of week up.

I am looking for a low around Wed or Thu. But my guess is most of the downside will come today and tomorrow.