HARAMI IS SUGGESTING A POTENTIAL REVERSAL
We finally have a change of behaviour:
- "Bearish" Harami candlestick ===> it suggests a sudden deterioration of the strength of the bulls. The trend can be on the verge of a reversal. It needs to be confirmed today by an eod print below 1646.68
- Despite the internal structure of the pattern from last Wednesday peak is not clearly impulsive we do have an intraday lower low as well as a lack of dip buyers. Therefore, pending the confirmation of the potential bearish outcome of the Harami candlestick, bears have a chance to gain the upper hand.
If this is the case I want to see:
- The RSI breaking down through its trend line support in force since the April 18 low.
- VIX has to close the gap at 13.59 (Double Bottom). If the gap is closed then as in the case of the McClellan Oscillator I will be aware of the potential Bollinger Band equity buy signal. (If this is the case we could see a move towards the 200 dma)
If bears confirm the topping pattern I rule out a major reversal instead I maintain the scenario that calls for ONLY a partial retracement of the up leg from the April 18 low. In other words in my opinion the advance from the November low is not over yet.
Why?
I have two major reasons:
- Elliott Wave wise the pattern cannot be considered concluded, since price from the April 18 low has not unfolded an impulsive structure (A corrective up leg cannot end an EWP)
For this reason I have been suggesting two potential counts for the advance from the November low:
a) Triple Zig Zag Option:
b) Double Zig Zag Option:
- The absence of a negative divergence of the Summation Index is suggesting that the advance from the November low is not over.
If today we have the kick off of a correction phase, I would be pretentious by establishing a target, but given the extreme overbought readings, I think it is reasonable to expect at least a mean reversion towards the rising 20 dma which today stands at 1608. At the same time even if a 0.618 retracement cannot be rule out beforehand, at the April peak = 1597 there is a huge support (SPY has a "Run away" gap which I doubt that it will be closed).
In addition Bulls are even fortunate since the McClellan Oscillator is already oversold (Amazing!!!!) and this time I will not underestimate the potential Bollinger Band buy equity signal.
Going forward I will also monitor TLT, since I consider that as long as the "oversold" bounce remains in force (Potential target in the range 120 - 121.26) the equity market should carry out the expected pullback.
Enjoy the weekend.
(I Don't know yet if this weekend I will publish the Weekly Technical Analysis)
