Friday, August 22, 2008
August 22, 2008; Trendline Being Tested
The trendline that was crucial to calling wave 3 of (3) being underway when it was broken is now being retested from underneath today (see chart above, red circle shows today's action bumping up against the trendline). The market definitely is aware of this trendline as it held the market up for weeks and now today it's finding a lot of fierce resistance right at the underside of it. Oftentimes when a significant trendline is broken, it's retested from the opposite side before it continues with the trend. However, if the Dow and S&P close above the trendline, it will negate the bearish wave 3 of (3) call that was initiated when the trendline was broken. This would negate the wave 3 of (3) in the short term, and we'll simply have to wait longer for another signal that it is in fact underway.
The Dow's trendline is around 11,610 today and the S&P's is around 1300. If both indices close above these levels today, it will cancel the immediate wave 3 of (3) down scenario and conclude me to think the initial break early this week was just a "false breakout".