dethending thursday, page-22

Morning all,

My take (guess) on things for anyone who's interested.

The bottom line is I still suspect we're heading for 3450 as the probable low. However, if you're not a daytrader, still a good time to go long anyway and risky going short.

treggs posted a great chart yesterday which (I think) shows the 4 hourly stochastic very overbought, suggesting failure at this level.

We stopped at XAO 3690ish which was 250 below 3940 resistance, which in turn was 250 below the 4200 bounce. So in that respect a fairly predictable place for a 50% bounce back to 3940. I mentioned Monday I thought we we might be about to rally back to 3940, but was a day early. I really should've been waiting for a triangle apex to cause this break.

Accordingly, XAO waited until the apex of the descending triangle from the 4200 spike met the channel base at around 3700 late-Tuesday to breakout. Also, it was clear during the day that SPX Futures had failed to cross down across its channel and was clearly about to break up (the incomplete crossdown created Wink's equilateral triangle. Well called Wink). Anyway, must admit I was asleep at the wheel late-Wed and (somehow) missed all these obvious signs.

So, anyway, XAO rallied back to 3940 as expected. Now 3690 is about 50% from 3940 to 3450. 3690 doesn't really make a lot of sense, but 3450 does. So that IMO implies a failure to get past 3940 for now.

Yesterday 3940 XAO, being major resistance, was always likely to be the limit of yesterday's bounce. Was surprised by the selloff after the open, however I think this can be explained - 3940 was only halfway across a channel - ie. incomplete, so XAO fell back to the channel edge below at 3800 at the close.

So now that its retested the top of yesterday's half channel, at 3900 this morning, I'd expect the drop back down to 3690 to begin now, then 3450 to complete the down move. I also note that BHP has just filled its overhead gap.

Note: Another possible (less likely) scenario, is about 3200. The initial bounce high was 4400 then a drop to 3690 is 710 drop. So 3940-710=3230.