Overall, the market will continue to just chop around on the daily charts for the remainder of the week. The plethora of economic reports is part of the reason for this since gains coming from a positive reaction to one release can be easily wiped out by the next.
With the rounded lows and the pace picking up on the upside on the daily charts, the odds are now greater that the indices will fall into a triangle trading range on the daily and weekly time frames as opposed to hugging the lows for a continuation breakdown.
Toni Hansen writes that typically the day before a three-day weekend begins with decent patterns in the morning, but volume tends to dry up as the day progresses.
The market is showing a lot more overlap from day to day as it has corrected in this support zone, but we are not seeing much for buy patterns develop yet.
Toni Hansen writes that the location of many stocks in their overall trends on the weekly and monthly charts are such that they can easily continue correct in coming months, so she does not want to be very aggressive either way at this time.
If the market is unable to display a strong reaction off the current lows, then we are more likely to see an Avalanche type of pattern form, whereby a longer trading channel at the daily and weekly support levels would be likely to break lower.
The pace of the selling is going to continue to hinder the bulls just like it did as the week began, making upside momentum very difficult, particularly in the morning.
With very few buy patterns even forming on the daily and weekly charts, and many weekly charts showing plenty of room to move lower, it will be a tougher environment for those unaccustomed to shorting or unable to do so due to account restrictions.
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