Dow Jones - Bullish divergence

Following a memorable 20% correction a number of reasons now exist to be long. On the above 2-day chart:

1) A ‘great buy’ signal prints with high probability.

2) Regular bullish divergence. Six oscillators are currently printing bullish divergence over a 15 day period with price action.

3) The green vertical strip is indication of a market bottom when certain conditions arise. If it is not in yet, it is extraordinarily close.

4) The 2-day death cross prints (red circles). Now this is typically a very bearish signal. However with the ‘green strip’ printing AND a 2-death cross printing.. Look left. It is powerful.

5) When you have the 2-day death cross without the strip you have 2008 all over again as everyone is talking about (see below). Heute nicht.

6) If price action starts finding support on the 2-day / 50-day SMA (blue line), the market will melt up until the year end.

Is it possible price action falls further? For sure.

Is it probable? Not in the near term.

Ww



2-day death cross

1-week chart

Type: trade
Risk: <=6% of portfolio
Timeframe: 2 - 6 months
Return: No idea

Comment:

PS: Watch the dollar index closely over the coming days. It is a complete bubble. When you see those hockey stick patterns created by a parabolic move, you just now know a nasty correction is coming. This correction will be rocket fuel for equities.

Comment:

This is the 5-day chart of the DJ30 (Dow Jones Industrial Average (DJIA), consists of 30 large, publicly-traded U.S. companies.)

Did you see the candle that just printed at the close of last week? A new candle prints this coming Monday. Look left, what do you think is about to happen for the rest of the month?

Latterly here is the 5-day chart with the PUT/CALL ratio (top) with the DJ30 below. The number of retail traders ‘short’ on the market has reached extremes.

The herd will always get it wrong. Look left. The lambs are about to be silenced.

Comment:

Price action has rallied 8% since publishing. Amazing. What happens next? The entire retail space and media seem convinced of a healthy pulled back. There’s merit to that, look left. On the 2-day chart below following the ‘great buy’ signal price action collapsed back the 2-day/21-day MA after crossing the 2-day/50-day MA (Highlighted in pink).

Might a correction not happen? Yes. This bearish sentiment could amount to a significant bear trap. How so? Two reasons:

1) The momentum into that 8% move. Look left, after the ‘green vertical’ strip (indicating a market bottom) + a ‘great buy’ signal, there’s never been an instance of a significant pull back after a strong sell off that led to the printing of a ‘great buy’ signal. That’s includes 2008 sell off. The momentum into this run is indicative of a melt up.

2) Price action is currently printing on the 2-day / 200-day moving average. IF… price action closes above 33900 at the end of Friday’s trading session, the market is going to see a monster rally. Take that to the bank. Laterally if candles start printing below 33900 by the close of Friday’s session, then take a long entry from 32700.

WW