12:51 p.m., EST
Upward Retrace To 38%
Downtrend To Resume?
It’s natural market behavior to rebound after a breakdown low.
Stops are hit; Amateurs sell and sell short. Professionals cover their shorts; go long or look to short again.
It’s what happens next, that’s important.
The market, DIA will likely come back to test the support/resistance boundary (blue line) in the daily chart above.
At this juncture, even though Dow Theory Sell was triggered (not advice, not a recommendation) with DIA closing below support last Friday, from a Wyckoff standpoint, DIA is in spring position.
Spring position; the market’s poised (but not guaranteed) to move higher.
If DIA comes back to test the boundary (typical behavior), there are two outcomes:
The test holds; price reverses and we’re on to potential new highs
The test fails; price re-penetrates the lows and then heads (much) lower.
Adding weight to the second scenario, DIA has already posted a new monthly low. That’s not happened since October last year.