In my strategy video for 12631 subscribers inside The PPT last evening, I discussed a bullish possibility for the markets playing out, called “The November Scenario,” referring to last November’s breakout from a descending triangle. Thus far today, we have a bounce going that is starting to gain momentum. Putting the rally into perspective on a daily timeframe, we can see that the bulls are still incredibly resilient in holding a series of higher lows by a thread. Indeed, the 1300 level is proving to be the true test of mettle.
While I may put on some trades as the day progresses, in order for me to get really aggressive again on the long side I am looking for this symmetrical triangle to firm up and resolve to the upside. Ideally, you’d like to see the action calm down a bit and these violent price swings abate. This should happen as price reaches the apex of the symmetrical triangle shown below, on a daily chart of the S&P 500. If we see a few “doji” days of more quiet, than violent, indecision, I am confident we will see an abundance of charts set back up underneath the surface.
However, we do not have the luxury of trading the market that we want. Instead, just like everything else in life, the main thing is trying to correctly play the cards that you are actually dealt. Accordingly, given the recent propensity of the market to punish momentum BOTH longs and shorts (instead rewarding extraordinarily nimble traders who buy the dip and sell the rip), I will let the bulls prove themselves first by following up on today’s move to the upside before signally the “All Clear” sign.
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