Down to 1350.76 so far, getting close to the .886 of the larger purple Butterfly pattern. We didn’t bounce much at all when RSI first hit its fan line, a show of strength for the bearish case.
The next test is the 60-min RSI, which has reached 18 — the low since August of 2011 and a sign of short-term oversold condition. A push into the 17 range would be extremely bearish, though I suspect we’ll get a bounce before too long.
A reminder of our downside targets posted on the 6th [see: So Far, So Good]:
- 1349.42 — .886 of the purple Butterfly
- 1343.41 — 1.272 of the yellow Crab pattern
- 1340.03 — horizontal support, prev. Point X
- 1323.85 — 1.618 of yellow Crab
- 1317.63 — 1.272 of purple Butterfly
- 1289.14 — 1.618 of purple Butterfly (and 2.24 of Crab)
I talk a lot about bounces, but watch the market’s momentum. If we slice through one level, consider adjusting stops rather than closing out positions. We’ve seen it happen often enough on the upside — where logical reversal points were routinely ignored by a runaway bull. The same thing can happen on the downside. It’s just been so long that it’s easy to forget, LOL.
This push below the neckline looks rather convincing, but — as before — the key is a close below it, currently around 1364. The fly in the ointment is the RSI, which just tagged the fan line from Aug 2011. It should provide at least a bounce.