Market Analysis

Structure Watch

structuresLast week in “Action Replay” I suggested that markets were following a very similar structure to the action seen earlier this year. Considering that the news flow is quite different to then the similarity in the structure suggests a market almost on auto pilot. I had made the case publicly that I would seek to short strength on Thursday into Friday in Tuesday’s trade plan “Tech Dreck“.

How did the structures hold up? Extremely well actually. Here’s a chart comparison for the $DJIA with the before and after:


The $SPX incidentally has been following a very similar path that Ive outlined for members which would suggest either a repeat of the January/February correction or possibly the April/August pullbacks:


If markets continue to follow the script an eventual test of the 100MA seems to be in the cards with bounce action to be had in between. That is if markets continue to follow this script. Is there anything to suggest that markets may be on a different path? Maybe.

Yesterday the High/Lows showed something they haven’t in years. Actual selling:


Following previous large negative divergences in the high lows has resulted in sizable corrections. I’ll be watching this data closely as it also lines up with the structure in the Wilshire 5000 I discussed yesterday.

Does any of this mean the bull market is over? Not at all, but it’s about identifying the risk/reward of any particular trade set-up. And the analysis showed last week that the risk/reward pointed to imminent downside. And we traded on it and it turned out nicely 😉

For more information about our trade philosophy please visit the About  and Trading Process pages.

Categories: Market Analysis

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