The Dow heads lower with Fibonacci bounces

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I don’t normally write to you two days on the trot. But these are not normal times!

I think something big could be happening.

So today, I have a short extra article to follow up on yesterday’s article on the dramatic moves in the Dow.

These moves have been following the textbook pretty much to a T.

In this morning’s chart on the 15-minute scale (see below), we had the huge plunge down to the sub-12,600 level, where the market became very short-term oversold.

Then, later in the day, we had the relief rally taking it right up to the Fibonacci 38% retrace of the big move down from last Thursday’s high.

(Click on the chart for a larger version)

And the market now appears to be resuming the downtrend.

In other words, that rally top at the 12,740 level was another opportunity to get short for a low-risk entry.

Here’s the rally in close-up:

 

(Click on the chart for a larger version)

See how the rally has a clear A-B-C form, indicating a counter-trend move, and not a new bull move.

Also, we have a superb negative momentum divergence between the A and C wave highs (green arrows).

That was another reason to suggest the rally was petering out at the 12,740 area.

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Of course, nothing is certain. The option exists for the market to move above the C wave high. If this occurs, I would be looking for a larger A-B-C form and for the rally to turn at possibly the Fibonacci 50% level in the 12,780 area.

Remember, this is not a trade recommendation. But by following real-time examples such as this, I hope to show how you can use my methods for high-probability, low-risk trading.

If you wish to reach a higher level in your own trading, make sure you grab the chance to get a seat at my next workshop – details very soon.

• If you’re a new reader, or need a reminder about some of the methods I refer to in my trades, then do have a look at my introductory videos:

• The essentials of tramline trading
• Advanced tramline trading
• An introduction to Elliott wave theory
• Advanced trading with Elliott waves
• Trading with Fibonacci levels
• Trading with 'momentum'
• Putting it all together

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Published in Spread betting blog More articles by John C Burford