Andrew pointed out that short interest has been at extreme highs for at least two weeks now and this is the fuel that drives the squeeze once it triggers. The herd, which is always wrong at tops and bottoms, was short at the bottom. Stop orders and margin liquidations on top of new buyers jumping in are driving price into the next as I write this.
This is the type of price action that signals the bulls have taken control. The 7490 level was the .382 of the recent swing which helped to define that momentum was intact. That level was blown through the second time price tested it. The next important level was the in the 7800 area which was also blown through. These are the confirmations that I look for to indicate a trend reversal is in effect. What does all this mean? On pullbacks, support is more likely to hold and resistances more likely to break.
The 8091 to 8543 (.618 of recent swing) is a minor area but within it, the 8442 level is the .382 resistance relative to the broader structure measured from the 11549 high. If price pushes this level, that is further confirmation that the next retrace should lead to a higher high and will serve as a high probability buying opportunity.
Where is a reasonable area to anticipate a retrace? The 7076 to 6815 minor (.618 of current swing). That is the area we will be looking for reversal patterns for another swing trade long.
In summary, we have been writing about signs for weeks and have been maintaining long inventory as well (go back and read all the reports). Remember this market has been sitting in the largest relative to the entire structure up to 20K. The chances of it finding support and developing a bottom are high and now it is starting to unfold. Bottoming is a process, and this impressive squeeze is the initial move that establishes a broad . If you missed the move, there is no need to feel bad because there are always more opportunities. Keep an eye on S.C. because when we call the next swing trade, the details will be there.
Questions and comments welcome.
Update: Price still hesitating in the middle of a minor resistance zone. I would not initiate any longs at a location like this. I do not react to market moves, I anticipate which means the only way I will get long for another swing trade is IF the market retraces and then produces a reversal pattern at a predetermined level. There are two areas where I will be watching for a new setup. The 7553 (.382 of current bullish swing) happens to be just above the 7490 resistance area which was compromised (wrote about this level in previous reports). This general area is an old resistance/new support and I would consider a retrace back to this area as somewhat shallow. The other support is the 7076 to 6815 zone (.618 area of recent bullish swing). Many are skeptical that price will retrace this far. I am not skeptical, all I know is ANYTHING is possible. IF price revisits this area, I will also be looking for bullish reversals. Again, any trade details will appear on S.C. (See my signature ).
Update: Price is beginning to retrace off of the 8091 to 8543 resistance zone (.618 of recent bearish structure). This is the higher probability scenario and is why we have been neutral on S.C. after our trades hit their targets on Friday. 7553 is the old resistance / new support level that we are anticipating price will retest and produce a bullish reversal pattern from. For those looking for precision, there isn't any. Trading is not about charts, its about preparing for scenarios that the market either validates or does not validate. And then adjust accordingly. Charts offer reference points and context to help structure decisions that are more relevant to market intent rather than your own ideas that are based on feelings. We will be watching the 7553 area or possibilities of a new swing trade long. Trade details will be made available on S.C. only.