As we have mentioned in previous posts where we noticed the importance of the declining 5 wave structure in S&P and DOW, the price action followed exactly our expected path of retesting the highs without breaking them. Both Dow and S&P tested their previous highs and turned back down to test recent lows.
DOW reached the 61,8% Fibonacci retracement in a three wave upward pattern as expected and is now challenging recent lows near 15800. S&P did not manage to break above 1814 and is now trading below recent low of 1779. The pattern as it is right now favors bears with much lower targets in mind.
S&P has important support at 1770 and DOW at 15700. Breaking below those levels could push these indices in deeper correction levels and that is why our members were notified by our analysis to avoid long positions and bet on the short side.
Dow is most probably heading towards the 38% Fibonacci retracement, whereas S&P is looking to test 1740 if support fails. The form and pattern of the decline will decide if we will label it as impulsive or corrective. Currently we have a three wave decline which is a characteristic of corrective patterns. We were expecting of this decline and that is why we went short in S&P from 1800-1805 area and today we have lowered our trailing stop locking in our profit.
The next few days will be critical for the next couple of months trend. Price formations are showing increased possibilities of a trend reversal but with no confirmation and with no verified signal yet. Both bulls and bears will need to be extra cautious as soon we will see another big move. If you want to stay up to date and prepared to profit from this market, become a subscriber today. As always, thank you for taking the time to catch up on my thinking.