I analyze macroeconomic issues from a fundamental perspective, and I analyze market behavior from a technical perspective. Original macroeconomic analysis can be found here and both macro analysis and commentary can be found on my Caps blog. If you like or appreciate my analysis, please add yourself to my Following List

Friday, April 13, 2012

Apr 13

We have a more significant weekly close in play now (largest weekly loss for the year). Per my Trend System, we still have a 60-min Down Cycle and Sub-Cycle sell signal (see: Apr 7 - Daily and 60-min Cycles, Looking for an Edge). The low on Tuesday was a spike bottom on my 60-min system (no divergence) and like I stated in the study from Apr 7 above 90% (61 out of 68) sub-cycle bottoms after a down cycle signal occur on divergence. This means that my system is telling me that the odds are very favorable/compelling to wait for another price low before the next sub-cycle bottom signal gets issued.

With the close this week, it looks like we are going to get one in the next week or so.

Looking ahead, there are two spots that look compelling from a pullback and support standpoint.

Both of these zones would make for a very nice looking Cup and Handle on the Daily chart.

And like I said before (Apr 7 - Daily and 60-min Cycles, Looking for an Edge) even though I am still looking for lower low on my 60-min system, my Daily System has not issued a sell-signal. And even more, my main indicator on my Daily System increased alongside price all the way up to early April peak. And as I said in the study, 90% of all Daily Cycles with the same characteristics (18 of 20) made higher price peaks after my main indicator rolls over (i.e. 90% chance that I will see a divergence before I get a Daily System sell signal).

For this reason (among many others) I am not looking for a 'major' top here. Rather I think this is a tradeable pullback from a swing trading perspective which will lead to a very buy-able dip from a longer term position trading perspective.
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