Now seems like a good time to have a closer look at this move down in comparison with the two prior retracements since 8 July.
The range of the rally 8 July to 23 September is 1080.15 - 896.32 = 210.83
The range down now is 1080.15 - 1019.95 = 60.2 points.
So it is a 28.56% retracement so far.
The first retracement was 39.49 points of a 148.68 point rally = 26.56%
The second retracement was 47.5 points of a 170.15 point rally = 27.92% (or 1.36% deeper than the first)
So this retracement is now the deepest of the three, and is 0.64% deeper than the second retracement, which is only marginal.
The retracement could go to 38.2% and still hold the move up from 8 July is a reasonably strong position. That level is 999.61.
Because the move up since 8 July has been very fast, and the retracements so far have been tight, it needs to stay that way or the fast move up is done and it either slows, consolidates / distributes or reverses.
So I can handle this retracement going this far down but any further and imo it is fair to say the fast move up since 8 July has completed and now something else is going on.
Using OHLC daily now shows a small spike down which reversed up as the most recent bar. 8 July had one of these and there was another on 10 July to produce a higher low. They tend to show downside testing with support coming in.
A lot of support came in last night in spite of worse than expected economic news. The sellers couldn't keep the fast momentum move down from slowing significantly in spite of that bad news.
Let me now make some assumptions:
1. Friday was a low at 210 days from 6 March,
2. The fast move up since 8 July is intact, and
3. The index is moving into a high around Friday 16 October.
If those assumptions proved correct when looking back in a month or two, what will show up on the chart next week as an early confirmation of this?
A higher low on the daily mid next week would be sound confirmation of a low in place.
I would like to see a move up Monday and early Tuesday to around 1041 with Tuesday reversing down and then Wednesday or Thursday back up after a higher low. Sn Teusday as a potential very weak counter trend up and then when the index started down again the move down would stay above Friday’s low to produce the lower high. Support would be coming in at a high level than Friday and that would sound the buyers are coming back to play.
That would be a good set up for a rally into Friday week.
The '38 rally was 224 days. We are now at day 210 from 6 March low. Day 180 was a low of significance. Day 210 would be another low of significance if the rally is to continue from here.
I'll keep throwing these scenarios up and when one plays out it would be tradable. In a way it is like fishing. Both require a lot of patience. Similarly, when one gets a bite, both become very exciting very quickly. Then it is a matter of not losing the fish (along with your bait, line and tackle - rod, reel etc) in the first part, and then when you know it is well hooked, bringing it in and getting it safely in the bucket.
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