As we just hit yet another target dead-on and traders are processing this "What's next" moment of their insatiable mental processes, we'd like to pause and consider what just happened.
HOW LOW SHOULD IT REACT?
First, let us say that the chart has absorbed a lot of the positions, and that some unwinding to the downside is occurring at the moment, right from the level we had defined as our original target at 1028.75. As bulls are keeping their sight to yet higher levels, expect for the current reactive decline to continue at significant Fib levels. We just defined 937.90 as a reasonable level of support, whereas the low of that impulse should concern bulls if it were ever reached (i.e.: slightly above the former 895.32 mark).
RETAIL vs. INSTITUTIONAL FOOTPRINT:
One detail to keep in mind is the institutional "footprint" seen in the , which can indicate a directional intention as well as define a price level of adverse tolerance to their directional commitment. What I mean here is that the recent spike rarely reflects a retail coordination, but rather a price-moving institutional move that occurred at a specific price origin, namely: 975.30. If you consider the entire impulse originating in on January 17th at the price mark of 867.43, then the 38% retracement of that level seem to correlate to where the swelled, again, here at around 975.30. So, expect a solid support if and when the current price action retraces to that level.
Given the current technical data, we expect institutional traders to start "reloading", very much as we had mentioned before when price would fall into that "PINK" zone, and we remarked that stop-loss hunting was occurring. We believe that the situation is the same, and that protracted consolidation as well as deep and measured retracements, remains the dominant manner in which larger players will hunt for cheap positions as they take out weak-hands. So, we recommend a structural approach to your defensive positioning.
We hit yet another target, and we remain in our directional bias. The current status quo will likely be dominated by institutional preparation for further advance. But this will require a known pattern of consolidation in which eager, junior and weak-hand traders will cede in their position to fuel that of larger, more intent players.
As Warren Buffett says:
"The stock market is a wonderfully efficient mechanism for transferring wealth from the impatient to the patient"
David Alcindor | 4xQuad.com
Predictive Analysis & Forecasting
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