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Back to Naresh’s email:
Considering your recent article , don’t you think that we are at a very strong resistance level of 50 % retracement of the total fall and the current up move is about to finish as we are very near to the time by degrees date as well
Well you might say we are at the telling time – let’s go to the chart:
click to enlarge
It does appear the market is failing this key line of resistance. You will note that back in June to October 2008 this level was both resistance and support and for that reason it may struggle at this level for some time – having failed once. It will get nervous nearing the next attempt.
Key question is how far might we see the market pull back? We have seen a lot of activity at between the 50% and 38.2% retracement levels. This could continue for a while. In the last few years we have seen strong trends in both directions. Could we be in for some range trading for a while?
All this chat about Greek maybe just that as far as the markets are concerned. The market sometimes needs a scapegoat. It needs to blame something else for a failure or retracement. It happened to be Greece this time. Or is this retracement much more sinister and is the beginning of a major reversal. For example there are more economies in Europe that could fail and even Japan could scare the living daylights out of even the most bearish.
So maybe I will pull out a chart I have not used for months as it was causing readers sleepless nights:
click to enlarge
I am not saying the market will come back to the old low but merely beware. As a matter of interest most daily Elliott charts are saying it’s upwards and onwards. Yes we could see a new high before a major failure.
Just a time to be cautious – not making the big calls either way.
Enjoy the ride
Tom Scollon
Chief Analyst
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