Saturday, July 6, 2013

07/06/13: Outlook for week of 7/8 - looking for creep up to 1635 then short

In the previous post, I mentioned a low on 7/2 and then a rally into 7/7 (or technically 7/8).  So far this has been going as planned except the price target for the low was off.

Moving forward, I will refrain from giving general price targets.  INSTEAD, the timing windows are absolutely more important.  You will see why given we have a multitude of possible price targets, hard to pinpoint exactly what happens.

In the chart below, I removed RSI and MACD.  These are basically standard indicators and I hardly use them anymore, so I replaced them with Aroon Oscillator for help in looking at possible cycle lows and highs before DPO.

The next timing window is noon 7/8.  The next major window is end of day 7/10.  The timing windows continue to indicate a high into 7/8 noon, and then a low 7/10.  Let's run through the possible scenarios.  I think giving price targets may indirectly influence trading decisions.  As long as we see a high or a low into the timing window, then we know the appropriate trading decision to make (the opposite).

1.  Scenario 1: uber bullish - gap up on Monday, we reach somewhere around 1650 and move up to 1655.

As we move into the timing window noon for this, we must be watchful of CCI 233.  If it's sky high around 100, we will refrain from shorting.  On the other hand, if it's muted (below 100), then we take a short position for the retrace to fill the gap.

This scenario indicates that we were DONE with wave iv and are proceeding with wave v to new highs above 1687.

2.   Scenario 2: Bearish - muted open, creep up to 1635.  

Under this scenario, the expanding diagonal pattern becomes possible.  This means that a muted creep up to 1635 suggests a short term high is in.  You would want to take a short position into noon for a retrace back to 1605 and possibly lower.  A significant trend change would occur if TSI < 0.

3.   Scenario 3: Sideways - down into the timing window noon 7/8.

If this occurs, which I give fairly low odds on unless something newsworthy comes out during the weekend, we have ourselves a bounce to play into 7/10, then short that bounce

What's my take?  I'm going with Scenario 2.  Reason being is we have some negative divergences forming on the hourly CCI.  What is giving me hesitation is that the gap on 6/28 implies a move up to 1650s.  Additionally, IF we are still in wave B of wave iv, then the target of this if A=C is still roughly 1660-1665.

In short, wait until noon 7/8!

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