The bounce back made a 32.7% retracement which is a little suspect. However, we are now seeing an impulsive move to deeper lows. This may be a Wave (b) of the correction and could see a bounce back, but the further it goes, the less the probability of being a correction. It has crossed Short-term support at 2433.69, but may hesitate or bounce. A continued decline verifies the impulse.

The NDX may have had a larger correction, but it appears to be finished. A decline beneath mid-Cycle support at 5737.71 gives us a sell signal.

VIX finally popped out of its consolidation zone but hasn’t yet made the breakout above the 50-day Moving Average at 11.66. I will point out that it has made an impulsive rally to 11.15, so a breakout above that level may be used as a partial confirmation.

The NYSE Hi-Lo Index hasn’t yet broken out against its prior low at -4.00. However, this reading would support an aggressive short position provided the VIX breaks out.

Be patient. No signal will get you out perfectly at the top nor will it get you in precisely at the bottom. Confirmations reduce the possibility of a draw-down when the market goes against you.

Regards,

Tony

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Disclaimer: The content in this article is written for educational and informational purposes only. There is no offer or recommendation to buy or sell any security and no information contained here should be interpreted or construed as investment advice. Do you own due diligence as the information in this article is the opinion of Anthony M. Cherniawski and subject to change without notice.

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