Yesterday played out as my primary hypothesis with the extended range although it was a few points shy of my final target(s) of 2008/2005 (see HVN and trend line). A lot of ground was covered and the gap filled from that huge blast off Mid December.
I think we are now at a fairly key level. That doesn't mean we won't go lower to test, however, if bulls are going to keep this going then we might expect at minimum a bounce play. Recent history suggests BTFD so with that in mind I'll be looking for balancing behaviour and/or a push higher without forgetting that the world probably turned pretty bearish for the short term.
It wouldn't surprise me to see a break into the prior balance between 1963 and 2010 zone. There are some interesting levels that could be tested, and further testing people's nerves and the market sure has a way of thoroughly doing that.
With rates going lower and the US stock market being one of the better (for lack of words) markets out there I believe there are still new highs to be made. Big picture is still bullish until proven otherwise. Global news isn't exactly thrillingly bullish of late so again, must keep that in mind.
Bottoming pattern signs I'm going to be looking for:
- Key test into prior balance zone and rejection
- Reduced volume
- Reduced range
- Choppy market/quick seemingly random moves
Overnight seems fairly balanced but the profile suggests a weak top, difficult to tell if it's valid though (for me that is). Volume delta is flat. VPOC higher than yesterday but within range for me to consider the same. No lower low overnight, yesterday was different unsure if it will have much if any impact though. Just noting it.
On to some trade ideas.
Range trade: I'll be looking to play this as my most likely hypothesis. Breaking overnight hi with passion will have me looking at the extended targets given in the bounce trade.
The bounce trade: For me to take this I want to see a test below and buyers stepping up (and price moving up). I would really like to see 2006 zone get tested and nicely rejected. This will allow me to have more confidence in a long. Will have to be cautious because I think it might try to shake out people before a move higher. Key target to the upside is the HVN at 2028, within range for a typical day. Overnight high is at a level I'm also interested and a scale point. IMO could easily drive up quickly.
Open Drive: Always hard to get on board but with smaller size... Same targets apply, however, I will look to add to the trade if action stays up.
Test higher and reject: Essentially what has been happening for the last few days. I'll be carefully watching my levels/price action for rejection. This hypo won't come into effect until 2006 zone is broken.
Feeling fairly neutral to very slightly bearish. There is some macro news (#grexit etc) that could and will likely cause some larger moves such as we saw yesterday.
*If an open drive to the upside happens I will look for a couple of equity longs.
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