To The Moon

Figuring out the bottom

The markets $DJIA(.DJI)$ , $NASDAQ(.IXIC)$ and $S&P 500(.SPX)$ had a decisive day moving upwards on Wednesday edged on by upbeatresults from Nike and Fedex. Some might wonder what is so upbeat when Fedex is seeing weaker demand. However that is how the market works. It goes whichever way it wants and sometimes we wonder why it goes in a certain direction! To be fair however, the markets were oversold and they were looking for a reason torally.

So is the recent low at the 3800s it? Or is the market positioning for another low? That is probably what many are wondering. I believe how the market behaves at the levels I will be mentioning will help in decision making.

I see a 3 wave move off the recent 3795 low on the 15min chart of the broad market index with the top of that wave 3 being around 3890. We are now at the 3880 levels which can count as a wave 4 only in the event the market rallies past the wave 3 top. If we get a blow off past that top, a wave 5 will form and the low was probably in which means a short term rally into the new year is a possibility. However, if market stalls and retreats to break 3850, they might attempt another lowbefore this pull back is done. 

So to recap, break above 3890 and the low is in and we will probably see a rally into the new year from here on. Retreat below 3850 and the market might probably dip some more before trying a meaningful rally.

I am cautiously optimistic looking at how other global markets are also moving and will buy into weakness at these levels keeping the 3720 levels on the broad market as a warning indicator. 

Thanks for reading my commentary.

Stay safe! 😊