Well that was an interesting way to end the week. It had been a pretty steady upward climb for the first
four sessions, but it took only one day for price to reverse weekly gains of 2% and more. This is
certainly different than the type of action we’ve become accustomed to, and it absolutely deserves our
attention. Of course, the question we’re all asking tonight is whether this is the real deal. We’ve spent a
lot of time discussing how price could put in an important high due to an upside pattern that could be
completing on three different time frames. When we see notable weakness emerge at such a point, it’s
pretty darn easy to get excited about the downside possibilities. But let’s keep it in check for the
moment. There’s no doubt that the potential is there for this big down day to turn into something
much more. There’s price action in place that can support it, and boy would the technical indicators be
happy to finally move out of overbought territory and pull back for a bit. But one day does not a trend
make. It was only last week that price gave us a pullback of similar size. It wasn’t quite as interesting
then because the move played out over more than one session, but it ended up being about the same
size nonetheless. Last week’s move was immediately retraced. So let’s see how price follows through
on Friday’s interesting action. It wouldn’t take much more weakness to confirm that the up leg that’s
been in play for the past two months is over. Heck, it wouldn’t take much to indicate that the sevenmonth
up leg has run its course as well. But of course, it all depends on price doing something it has
not been capable of doing for a while – following through impulsively to the downside. Until it does,
we have to assume that this is just another corrective pullback, a possibility that is not hard to justify
as we’ll show below.
four sessions, but it took only one day for price to reverse weekly gains of 2% and more. This is
certainly different than the type of action we’ve become accustomed to, and it absolutely deserves our
attention. Of course, the question we’re all asking tonight is whether this is the real deal. We’ve spent a
lot of time discussing how price could put in an important high due to an upside pattern that could be
completing on three different time frames. When we see notable weakness emerge at such a point, it’s
pretty darn easy to get excited about the downside possibilities. But let’s keep it in check for the
moment. There’s no doubt that the potential is there for this big down day to turn into something
much more. There’s price action in place that can support it, and boy would the technical indicators be
happy to finally move out of overbought territory and pull back for a bit. But one day does not a trend
make. It was only last week that price gave us a pullback of similar size. It wasn’t quite as interesting
then because the move played out over more than one session, but it ended up being about the same
size nonetheless. Last week’s move was immediately retraced. So let’s see how price follows through
on Friday’s interesting action. It wouldn’t take much more weakness to confirm that the up leg that’s
been in play for the past two months is over. Heck, it wouldn’t take much to indicate that the sevenmonth
up leg has run its course as well. But of course, it all depends on price doing something it has
not been capable of doing for a while – following through impulsively to the downside. Until it does,
we have to assume that this is just another corrective pullback, a possibility that is not hard to justify
as we’ll show below.