Last week we questioned the validity of the rally that was induced by the trade war truce. It turned that the rally was used as a selling opportunity. It didn’t even have the strength to reach a symmetry swing at 2845 to create an appearance of a bullishness. It promptly failed at 78.6% of the ab swing at 2800.
The DOW closed at 25115.75 on October 31, 2018. This close is sandwiched right between bearish and bullish numbers.
As we have stated before that the market is in a 4-year cycle high to low correction phase, we shouldn’t open new long positions. But we do have a rare high tight flag situation that warrants your consideration. This formation is so rare that had succeeded several times in the past during the market downturns.
Finally the DOW made an outside reversal week on 10/05/2018. This is the start of the seasonal correction. It is 14 weeks into the current weekly cycle that was started on the week of 06/29/2018. This correction against the January 2018 high does appear to be a selling off of a double top.
The market continues to be resilient. The DOW had an inside bar last week on the 13th bar. The cycle oscillators are turning down signaling an upcoming mild correction. Underneath the general market, the banks and housing sectors are really weak.
