Tuesday, 3/17/15

The daily chart shows price yesterday making a higher low and higher high, closing above the daily, weekly and monthly pivots and just below the declining MW MA. So what is going on with these large moves alternating up and down? It is possible that Thursday's up day was what one would expect from price coming out of a MD and MW low. The MD high was projected for overnight prior to Friday's trading, and that may explain Friday's sharp retracement; the fact that the pullback didn't find support on either the weekly pivot or MD MA is difficult to explain under this scenario, however. A half-span MD low could have occurred Friday, which would then account for yesterday's large move above monthly pivot and MM MA resistance as price was again on the upside of the MD and MW cycles.

The alternative to the above is that price is being squeezed into a triangle. Triangles in cycle theory develop when cycles are at odds with each other, such as a rising MM cycle butting against a declining MY cycle (or vice versa). The larger timeframe cycle always wins out in these situations, so if a triangle is developing, its eventual breakout will be very telling. Trading during this period will be difficult for daytraders and swingtraders, however, as halfspan shifts predominate and make predictable behavior scarce. It is interesting that the weekly and monthly pivots are located on just either side of the apex of the triangle, so perhaps it is those two cycles at odds forming the triangle.

Regardless of which of the above is happening, we are currently in the window for the projected multi-week high. That price was able to close above the MM MA and monthly pivot was bullish, but a MW high underneath the declining MW MA would trump that for the bears. If we are on the upside of the MD, MW and MM cycles, that MW high projection could certainly right-translate giving price no excuse not to rise from here and take out the MW MA this week. Failure to do so has very bearish connotations.

When we speak of the daily chart possible being in a triangle, one should prepare for the hourly chart to be littered with confusing price action, and that is the case in the chart below. The two 24Hr highs marked with down arrows are almost 48 hours apart, which begs for placement of another 24Hr high somewhere between the two. Likewise, it has been nearly 48 hours since the last 24Hr low marked with an up arrow. It is possible that Friday's rally into the close that stalled at the daily pivot was a 24Hr high, followed by a half-span 24Hr low (both marked with "?"). If that is the case, we need to consider that a 24Hr low was made overnight followed hours later by a half-span 24Hr high this morning made against the underside of the MW MA. I will hold off on any official assignment of these possible highs/lows until price gives more clarity. Regardless, a session high is due just after the open, and price is currently testing the underside of the session MA. A lower session high would indicate that we are on the downside of the 24Hr cycle, and price should test the daily pivot at a minimum in search of the 24Hr low. A break above the prior session high would mean that we are on the upside of the 24Hr cycle and lead to a retest of yesterday's highs.