I was partially right this morning. It appears that short sellers did come in under the 50-day Moving Average. This type of retracement is an attempt to hunt out all the stops to find liquidity to keep the rally going. It appears to be over, or nearly so.

In the meantime, the old Head & Shoulders neckline was invalidated. A new one took its place, however, with a lower Minimum Target. Should the next decline follow through to its target, the longer three-year trendline at 2020.00 may be taken out. Head & Shoulder necklines do not tolerate throw-backs, although the Megaphone formations do.

Those who went either totally or incrementally short above the 50-day Moving Average don’t appear to have any issues with this bounce until it exceeds the 50-day at 2102.05

Today appears to be a “shakeout” day. This market may reverse on a moment’s notice.

VIX is back beneath its 50-day Moving Average at 13.58. This correction may either be an Expanded Flat correction with Wave (c) terminating at 13.05 (the Wave (a) low) or an irregular correction in which Wave (c) may terminate higher or lower than the low at Wave (a). This currently makes the VIX signal neutral unless it exceeds the Wave (a) low.

The VIX is at a minor Pivot today, which implies a reversal to the upside is due.

The Hi-Lo is also in neutral. There may be trouble should it exceed its prior high at 93.00.

Otherwise we are looking for a reversal back down beneath its 50-day Moving Average.

Tomorrow is a pivot day for the Hi-Lo and SPX. We may have to wait overnight for a resolution. However, this top-to-top Cycle is 34 hours long and the hourly pivot (34.4 hours) may occur by noon or 1:00 pm. Should SPX stall at the 50-day, it would be worth hanging on to the short positions.

It now appears that TNX may touch its Cycle Top resistance at 25.27 before reversing back down. That suggests money is still flowing out of treasuries for the time being.

USB/TLT is overdue for its Master Cycle low. Tomorrow it will be 8.6 days beyond the normal 258 days. It may be that the big reversal may happen tomorrow.

Regards,

Tony

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