Despite their recent pull back from their all time highs, US indices were strong enough on Friday’s session to stage a reversal and to challenge the previous highs. With Nasdaq being the exception, DOW and S&P have managed to reach or even surpass the 61,8% Fibonacci retracement of the decline but did not manage to make a new higher high. Nasdaq on the other hand not only made a higher intraday high but also a higher close. Trend in all time frames remains up as prices continue to make and higher lows.
However there are several worrying signs coming from DOW and S&P price formations. The recent declines were both 5 wave impulsive moves. This implies an upward bounce and another downward move at least. This means that both DOW and S&P should find strong resistance at their recent all time highs and should reverse downwards to new lower low.
The meaning of all this? Bulls should be very cautious despite having the trend with them. Prices have reached certain levels and have formed specific patterns that justify a deeper corrective move downwards that is tradeable.
Price levels that should be considered as very important levels for short-term bulls are 1800 for S&P, 3470 for Nasdaq and 15925 for DOW. Breaking below those levels will increase the chances of making and completing the corrective pattern that started on November 29th.
As always, thank you for taking the time to read my new post.