In most cases the period after seeing an extreme high of the ratio is one of further market advance, but not always and not immediately. In general, if the market continues upward immediately it seldom looks back. However, when the market does not IMMEDIATELY continue upward a retest of recent lows occurs, often registering a new lower low. Previous episodes have near 50/50 outcomes with a slight edge for continued advance. Which will it be?
The case for further advance is compelling since market wisdom advises "don't fight the tape." An immediate and continued upward move would strengthen that view. However, that is a single data point, albeit powerful, for the view. Another would be confirmation of an upward 5 wave formation having started 12/26/18 (tbd).
The case for a retest of recent low (12/24/18) includes substantial challenges. Failure to continue immediately upward is the first event to look for. Just ahead is the 50d and then 200d . Lastly, recent support, beginning at 2603, now becomes resistance. A "Bat" pattern (not shown) is also forming. Those hurdles are very significant.
analysis helps identify target market levels with use of Fibonacci levels. The bounce from 12/26 appears as wave B of the corrective started in October 2018 with slightly larger than of wave A. I've targeted a standard 61.80% at a target area at 2714 for retracement using drop from 2018's all-time-high to Dec 2018 low. It is reasonable to expect wave B to take form as a lower degree before reaching conclusion. A near term drop (b) followed by an upward move (c) equal to length of that from 12/26/18 to Jan 2019 is standard form. The eventual level will determine the high of higher degree wave B's move, whether at 2714, or not. A larger degree wave C then follows and is targeted at Fibonacci level 2242.
structure (and degree) help shape expectations, with Fibonacci levels (using 2016 low to 2018 high) providing target guidance, followed by standard wave structure to build a view for the path forward.
The days ahead and IMMEDIATE price movement will provide first clues to help identify when "all clear" will be signaled.