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Thursday, October 4, 2012

Daily update 10/3

The fourth upside gap in a row finally got us into retest mode.  Here is the daily chart.

I don't have the fib grid on here because it makes the chart very hard to see.  Today we crossed above the .618 retrace level, but did not quite get to the .786.  I consider anything above the .618 level to be a valid retest.  Now we just need to see what the market does with it.  Lets take a peek at the 60 minute SSO chart.

We gapped up over the red resistance line and the down trend line this morning.  The high of the day was made in the first hour on the initial short covering rally.  The rest of the day was spent in consolidation mode with people buying dips, but unwilling to push price higher.  Here is a look at the current breadth picture.

All indicators are showing significant divergences with the Sept. high.  This does not tell us if the test will be successful or not.  However, if price ends up rolling back over, we will get a deeper pullback then the last one.  Remember the short term and sub intermediate trends are neutral here.  More downside will easily be confirmed by breadth this time.  Without significant new highs we would not have the high odds of a retest that we had last time.  There are many indexes lagging behind in their short term patterns that were not lagging before.  We will just have to wait and see what the bulls do.


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The information in this blog is provided for educational purposes only and is not to be construed as investment advice.