Posted 8:20 am PST.
The most important price action in today’s intraday report is the parabolic wedge top that resulted in the third failed breakout above last week’s high. Last week’s candle is a signal bar for a breakout pullback buy, and today is the third consecutive day when the market went above the signal bar, but pulled back. There were two strong bull bars in the rally on the open, but both had weak follow-through, and the market stalled in yesterday’s trading range. Both increase the chances of a trading range day. The market might be waiting for tomorrow’s close to decide whether this week’s candle will be a strong entry bar for the weekly buy signal, or a doji. In either case, the market is at the top of the weekly channel and this price action will probably lead to a pullback to around 1900 over the next month.
The all-time high is just a little higher and it is the top of the wedge on the 60 minute and daily charts. The bears want this double top to lead to a measured move down. The bulls want a breakout above the double top and then a measured move up. Since the market is at the top of the weekly channel, the upside is probably limited and the stock market will probably trade down in a correction over the next month or two.
The Emini rallied up to last week’s high, but the rally had three pushes in a tight channel, and therefore created a parabolic wedge and the high of the day. The market broke to a new low of the day, but when this happens with a parabolic wedge top, the market often forms the low of the day and channels up for hours. Bulls will need a second entry buy or a strong move up to confirm the reversal. Otherwise, this could be the start of a big bear trend day. Bulls will look for a double bottom over the next ten bars and then a channel up. Bears will sell rallies until then.