U.S. Indices Near Short Term Bottom
Alexandros Yfantis | Aug 28, 2013 06:45AM ET
US indices continued lower yesterday, making a lower low. This lower low could be what was needed to complete 5 waves down from the all time highs. The wave sequence could already be complete or we might just need another last leg down to complete the entire move.
If you are familiar with Elliott wave theory then you should know that next we should anticipate an upward corrective move that will most probably reach the 50% or 61,8% Fibonacci retracement.
As most of you who follow my posts will have noticed, we were bearish near 1700. In fact, I opened short positions in SPX from 1698. Our longer term view may remain bearish, but managing our position is very important and short term trades could be crucial for us to continue to be profitable.
Prices, as shown in both charts I'm posting today, have almost completed 5 waves down from the all time highs. A new low could be expected but it is advisable that buy stops be lowered. Support in the Dow is found at 14750 and at 1620-25 for the SPX.
We believe that an upward corrective wave will soon start and will push prices towards the previous wave 4 or at the 50% or 61,8% Fibonacci retracements. At those levels we will once again look to sell the market.
Aggressive traders could also enter long positions to take advantage of the impending upward bounce. We should remind readers that trading corrective waves is even riskier than normal as corrective waves do not have a specific price pattern and can behave abnormally.
Concluding: We are near a short term bottom and bears should cover or protect their positions. We expect an upward bounce soon in US markets. The form and pattern of the upward bounce will decide if we should expect to see more selling pressures or if buyers will regain control of the markets.
Disclosure: None of the information or opinions expressed in this blog constitutes a solicitation for the purchase or sale of any security or other instrument. Nothing in this article constitutes investment advice and any recommendations that may be contained herein have not been based upon a consideration of the investment objectives, financial situation or particular needs of any specific recipient. Any purchase or sale activity in any securities or other instrument should be based upon your own analysis and conclusions.
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