Last week I wrote:
"The low side of the previous up moving pitchfork, a previous low and the 200 day average gave not enough support. The index moved further down reaching on Wednesday the 161.8% Fibonacci target and a low of 1820. Thursday and Friday brought an up pullback towards the 200 day average and the previous low of the start of wave 3.17. This may be already the end of the retracement or there may be some more up move towards the S2 support pivot of the month and the upper side of the BBS band. We have already a confirmed 123 wave 3.1 down. I assume the long term correction has started and we should expect wave 3.2 down the coming week(s). If you still have long positions, watch them closely. ".
The rather large up retracement we are witnessing now is confusing, but possibly normal. From the top of wave 3.18 we had a large move down in a very short time period. The reaction is a comparable large up move, also in a very short time. Question is will the correction stop at the level we are now? The index reached the 50 and 100 day average, a 50% retracement of the last upswing (the start of wave 3.17 and the end of wave 3.18) and the upper side of the BBS band. The wave 2 correction is still valid. Possibly there is enough resistance to push the index down again. On the other hand we must keep in mind that the year end is coming close. Bullish money managers will try to keep the paper profit for a good end of year report not willing to sell and keeping prices up. The coming week(s) will show what we may expect, perhaps even another higher wave 3.19?
Sylvain Vervoort http://stocata.org/