Are we there YET? Almost but…
As much as I want to call the Cycle wave 3 as complete with a Cycle wave 4 correction now underway – I can’t. The strong sell off of yesterday’s 13599.75 high in the NQ dropped prices 715 points to today’s low at 12884.75. There were periods of free fall as the index shed 100 points in less than 5 minutes. It was unforgiving to traders who happen to step in front of the waves of sellers and it was a gift that kept on giving to traders willing to surf the waves of sellers. The velocity of both the declines and rallies gave ample opportunities to trade the ebb and flow of the market very profitably.
But — technically I must leave open the possibility that the NQ can still turn and rally again to new highs to complete the larger Cycle wave 3. At this stage and current levels I don’t give a high probability level to that occurring – but stranger things have happened after earnings reports. So, until a clear and clean 5 wave decline can be counted on the hourly chart the potential for additional highs remains in the picture.
Taking a look at some of the internals of the decline suggests that the NQ has completed waves 1 – 3 of the initial 5 waves to signal the completion of the Cycle wave 3 and the beginning of a Cycle wave 4 correction. Back to the hourly internals – off of today’s 12884.50 low it appears that wave 4 is underway with rallies being held to resistance at 13148 to 13230 with the decline picking up again and dropping prices to additional lows under 12884.50. Should this be achieved expectations would be for an A-B-C advance to occur with prices returning to the area of the previous 4th wave most likely above 13100. Additional Fibonacci levels can be added to the move as it progresses which will better define support and resistance levels as well as entry and exit points.
Thursday could be an inside day but I confident that ample trading opportunities will also occur. Staying flexible to using all of your trading tools including which method to use, i.e. scalping, swing trading and wave riding direction will help to keep your PnL positive.
Stay Tuned – much more to come..