Next week is shaping up to be quite the roller coaster again. We have the FOMC meeting, housing, along with opex. If you like to trade volatility, next week should be no different from the past couple of weeks.
Currently, I believe we are still in the middle of intermediate wave iv. Wave A finished at 1598 and we are in the process of finishing wave B which I believe is targeting somewhere > 1648 (1660-1670) before falling off a cliff the week after.
Monday is looking neutral. I don't really have a conviction either way if it's up or not. However, overall, the week is looking bullish into mid week coinciding with the FOMC meetings before tanking and starting the wave C we are waiting for.
I've noticed many people are seeing a triangle forming which implies further downside below 1608 and consequently below 1598 and that there little probability of revisiting 1650. My view is although there is a triangle, this could in fact form a bear flag that connects the two most recent lows and with the top of the channel the underbelly of the broken channel that began from the November 2012 low. This implies that we see prices revisit 1650 and further.
The rationale is:
1. Hourly OBV is making a series of higher highs and higher lows. Recently price action has only shown higher lows but not higher highs. I'm a believer that volume leads price and the bigger the divergence the more likely price will shoot up quickly.
Additionally, volume is testing resistance of the broken uptrend. Price is still way below. If price were to test the broken uptrend, this would be around 1660.
If we were in a triangle I would want to check the hourly OBV to confirm the pattern but it isn't.
The following are notes I've mentally jotted down here...mostly just myself rambling away.
My view is we are STILL in wave B. If we break wave B further, I think A of B finished from 1598 -> 1648. wave B of B finished at 1608 (1648 -> 1608) and we are in the midst of wave C of B.
If A = C, then a target for the final move of wave C of B is 1608 + 50 = 1658.
If in fact, wave B finished at 1642.63 instead of 1648, then wave C is 1608 + 44 = 1652
There was the positive reversal on the CCI 233 that I mentioned earlier in the week. This coincided with the ramp from 1608 to 1640. If this is indeed valid then the positive reversal calculates the following target
1648.69 + (1612 - 1602) = 1658.69. (1612 and 1602 are ROUGH estimates of the closing hourly bar of the recent lows).
Depending on how you draw the channel from the November 2012 lows, it could be anywhere between 1653 and 1660. 1653 is also the 61.8% fib from 1687.18 to 1598.23. Hence a range of 1653-1660
The IHS where the neckline is formed roughly around 1637 and the neck starting from 1608 implies a target of 1666 if broken. 1637+(1637 - 1608) = 1666.
So now we have several targets mostly in the 1650-1670 range. The average of these seems to be roughly 1658. 1658 seems the more likely candidate for the bull case.
In terms of the bear case, I think at present time it is weak. It will turn strong later in the week but currently it is weak. I am only expecting 1615-1620 if we break lower on Monday. This would imply that we truly are in a triangle.