So if you are wondering what this all means, I say it is a great thing in the larger picture. My expectation is that we get a drop to a support area near the 3028 which was the previous all time high back in July. We will want to buy this, but this dip. It would be the second daily cycle since the October 1 Intermediate Cycle Low. I would anticipate that a left translated second daily cycle will be necessary to bring us back to the Intermediate Cycle Trend Line down in the 3000 area. A break in that line will give confirmation that a new ICL is about to begin. The 200 day moving average will also be present near there, so that just seems to be a logical level to me.
So why would we want to buy this next daily cycle low? A bounce off the 3128 would probably trigger a short term buying frenzy. The problem is that sentiment would probably not be extreme enough to take us back to all time highs. We would keep stops tighter than I usually would so that we can guarantee a bit of money. A further drop into an ICL will cleanse the sentiment from the market and set the stage for the next intermediate rally.
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