What in the world is this?
I have diagrammed out a broadening formation which is taught by a famous trader by the name of Kevin Haggerty. The rules as to how these points are derived is proprietary to him, but not necessary for this discussion. The basic concept is that once these form at key points, often large market moves happen.
There was also one at the high, just for the record, which did predict this downward move. This one happens to be occuring in the zone of the 200 day moving average, which is a widely watched level by institutions. I for one have not found it significant in my studies, but many other very good traders swear by it. Please also notice that the commercials have increased their long positions over the prior week. When you combine these two things, this is a pretty good buy signal. I realize I will get booed out of town for saying anything other than the world is ending, but this is how I see it.
Whether or not we have another huge downdraft or not nobody can know, but the fundamentals are in place for a bounce from here. If you combine this with what was in my last post with the Vix, there is a reasonable basis for an upward move. If it happens, I will be watching my model closely to see if the commercials jump off the ship. If they do, I will jump with them.