edit 2:10 - So much for the ending diagonal theory
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Okay, here are some thoughts that are going to sound like waffling. And to be honest, it really is waffling. Because things are not making sense and it is bugging me. I am getting several conflicting signals and I am trying to find the best story that leads to the least conflicts.
1 - no true divergence at the low). Now, there is no *requirement* for a divergence low after a 60-min Downcycle signal. But there is a *very* strong tendency for there to be one (90%). What we got instead was a double-bottom move. And like I observed yesterday, the Nov 2010 pullback was essentially a double-bottom move. So there is a recent precedent for this. But as ZimZeb pointed out there are some distinct differences that are making me doubt the comparison. (i.e. that we actually have a finished correction)
2 - a potential trend system setup). The reason why I thought the correction was over was the sub-cycle cover/buy signal that got issued with the gap up. As I have explained before, there can be many sub-cycles within a cycle (on average there are two). But the strength of the move up makes it seem like this sub-cycle bottom would lead to an Up Cycle confirmation. I said yesterday that if the price stayed above 138.50 until Friday that we would get one. But I am thinking how sneaky this market is being
We had a failed down cycle in March. And that manifested as a down cycle signal right at the peak of the pullback in March (which was a downsloping ending diagonal). We have nearly the opposite at work here right now. We have a Up cycle signal that will be issued in about a day and the price action looks like an ending diagonal after a large gap up.
So could we have an upside breakout fakeout at play? I certainly think it is possible.
But is it likely?
To answer that I revisited my micro-count, and here is what I see:
We have a move that counts like a large regular flat, and a move up since Monday that counts like an impulse with an ending diagonal right into resistance.
Two options come out of this:
1: This is the end of the up move and we have a lower low ahead.
2: The correction is over, and this is a wave 1 or A up and we have a Wave 2 or B down next
Either way the count seems to be saying that the next move is down. And it is happening at a time where it would be poised to negate a potential Up Cycle confirmation on my trend system.
This being the case, I am not inclined to give the benefit of the doubt to the bulls right here and am going to be looking for a pullback to really develop into something. So right now I will be looking for evidence that this ending diagonal terminates, and likely looking to go short again.
