As I wrote in my previous report, 8171 to 4983 is the largest magnitude .618 based on the entire price structure of this market. There is no other more relevant than this one. As suspected, buyers are slowly reentering the market as the Senate hearings put the general sentiment at ease. The general sell off is nothing more than a typical over reaction, and now is the time to watch carefully for the follow through as the market firms up.
Keep in mind, as as I have been and continue to be, this market is not out of the clear yet in terms of structure. 8427 is the first level that needs to be cleared which will indicate that the current leg is more than likely complete. From there, price is likely to test the 9887 to 10836 (minor .618 of resent swing) which is somewhat in line with the broad . This minor resistance serves as an initial target to lock in profits for any aggressive longs taken during the recent lows.
What will determine if a broader momentum change is in effect is the next bear test. What makes these lows very tricky is there is no way to know if this is the beginning of a broader move up, or another head fake that will lead to a retest of the lows. If you are long from more aggressive entries, the best thing to do in this situation in my opinion is to now wait for supportive structure to unfold if you want to add to your position. There are three scenarios to watch for: the shallow pullback (often a couple of very small range candles), the higher low, and the (retest of 6K).
If this market conforms to one of these scenarios, and does not make new lows, then there is a better chance a broader move is in play rather than a retrace back to lower lows. Also the fact that price is firming in a major adds a lot of weight to any formation that appears.
In summary, being aware of risk is more important than rewards. This market still has room to test the low 7Ks or even 6K, but is less likely to go beyond that. With this in mind, you can better prepare for buying opportunities and manage risk as the market chooses its path. Choosing to be aggressive (buying into weakness) or conservative (buying upon structural confirmation) is all dependent on your risk profile and personality. In my case, I am long from an average price of 10800. I am open to adding but only on confirmation of structure. Playing the bigger picture in this way requires the patience and discipline to stick to the overall plan and not be swayed or shaken by immediate price movements. If you find yourself reacting to every little data point in this market, it means you have not chosen a time horizon. Start with the big picture and small size, that is a simple and effective way to keep probabilities and risk much more favorable.
Questions and comments welcome.