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Last week I wrote: "There is a nice negative divergence between the index with a higher top and the stochastic RSI with a lower top. Meaning we can expert a continuation of the medium term down move. This looks confirmed with the end of wave C, also the end of higher order wave (C) and longer term wave [B]. Furthermore with an index current high around 2820 we are very close to the 161.8% Fibonacci target projected over the end of wave [A] and the end of wave A. Watch your long positions because if this is correct you should expect a move down in first instance to 2480. That is more then 300 points down or more than 10%. This target is given assuming a more or less equal size for the wave [A] and the expected wave [C] from the top reference of wave [B]. Read my updated comments here for the weekly chart and monthly chart for more information regarding the longer term view."
The index went higher the past week reaching the 161.8% last Fibonacci target but, fell back on Friday. You can see two consecutive higher tops in price but, lower tops in the stochastic RSI. Most probably the reversal for wave [C] has started. The correction wave uptrend to downtrend reversal is possibly started based on the following rules:Expecting a wave 1 after a larger downward candle.
- The index is near the top of the volatility band.
- The last move up is a completed correction wave.
- The stochastic RSI is showing a negative divergence.
- The index is at the 161.8% Fibonacci target and resistance level.
Read my updated comments here for the weekly chart and monthly chart for more information regarding the longer term view
Sylvain Vervoort https://stocata.org/