With all the excitement of the "top" being possibly in, it's important to realize that we've seen this before, and we need further proof of weakness to make the assumption that sellers are predominant.
The percentages were based on an Open basis of the first red bar and a Close basis on the last red bar.
Let's point out similarities and differences of these two moves. -Coming off of the lows in June of '09 price rocketed back to the 38.2% retracement, while more recently price chopped in an inverted roof type pattern before gaping up above it's 38.2%.
-It's interesting that in both instances, price gaped above their 50% Fib. Retracements. The occurrence in July '09 was a strong impulse trending move, while in today's situation price came back for a test of this level.
-There were three specific consolidation levels coming off the lows in July '09; at the 38.2% & 78.6% retracements, and at a previous resistance level going back to June (blue horizontal line).
-So far, price was very resistant at the lows of the previous swing move ($108) and now consolidates under the $111 area that acted as previous resistance going back to January.
It seems apparent that based on price alone, the recent moves up have been in a very apprehensive style.
While there are comparable similarities in price, it is what the Dollar has done, and is doing now, that is most interesting. Take a look at the U.S. Dollar Index where the dates to compare are segmented with vertical dash lines.-Back in June '09 price seemed to have double bottomed off of December '08 lows and formed a bullish flag (coinciding with selling in the S&P's). Psychology being, "a dollar bottom could mean lower prices ahead in equities."
After consolidating in a tight range, price finally failed and broke down, giving us the gaping trend day in equities on July15.
-Most recently we see a similar behavior pattern develop (again, the dash vertical lines span the top to bottom selloff we have recently witnessed in equities). Price broke out of an overhead resistance level, giving impulse to an equity selloff. The Dollar Index currently sits in a consolidation phase that just may determine the direction of our equities path.ALL eyes on UUP!
The setups I include on this blog are used in conjunction with the 3/10macd and the criteria I ascribe to it as a way to alert me to an existing condition of price. The key concept to take away from this blog is that I try to anticipate what will happen on the higher time frame by using a faster time frame to trigger the trade setup. I do not trade a "system" I use two indicators to clue me in to price conditions. Please read the Disclaimer located in the sidebar of this site. I can be contacted via email at email@example.com
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