Yesterday, we hit our initial downside target laid out over the weekend [see: So Far, So Good] when we nailed the Fibonacci .886 retracement of the Butterfly pattern (purple) we’ve been following since April 10.
This morning, we bagged the next target on our list, the 1.272 extension of the smaller Crab pattern (yellow) at 1343, which has me wondering…what’s next?
Not that it always works this way (enjoy the streak!), but here’s the original list:
- 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)
The charts say there’s plenty more downside. My top case remains 1289-1317. Though we’re back to that RSI trend line (k-5) that provided yesterday’s bounce. We can get to 1289 with a cross of that trend line or without. It’s a matter of “recharging” RSI with bounces such as we saw yesterday and this morning.
At the end of the day, the “bottom” should exhibit positive divergence, and we’re nowhere near that yet.
So, is it time to pile on more shorts? If we’ve scored 5 waves down, we should see an a-b-c corrective wave. As I posted last night, there’s a potential small H&S pattern developing in the right shoulder of the larger pattern. Prices could loiter in the 1340-1370 area for a day or two and flesh out the small right shoulder before continuing down. A 7-pt gain at the close would shake out lots of shorts.
This would offer the added benefit of fully recharging RSI/MACD for the next push down — a very helpful development, should it occur. I’ll be watching to see if RSI heads up into the intersection of that bold yellow trend line above with the bold yellow channel.
Good luck to all.
Now, we see that the euro zone is considering holding back the next installment of Greece’s bailout, some $5 billion or so. They have this crazy notion that the Greeks might renege on the austerity package/debt restructuring previously agreed to. All together, now: “duh!”
Whatever your opinion of why Greece has money problems, the bailout did very little to help the Greek people, who just expressed their heart-felt feelings about austerity in the voting booth. It mostly bailed out the bankers who made too many stupid loans to Greece (gee, where have we seen this before?)