Good afternoon team,
Frustrated that gold ruined a clean week, in theory, the decline in the USDJPY should have played into a higher gold price but that did not occur. I am going to revisit gold at a later stage once a more concrete bottom formation has formed.
This afternoon I am taking a contrarian trade, looking for a rebound in the US stock market for either a corrective rally or the start of a new move to the upside.
If you were watching the Technical Analysis (Indices) tab you would have seen the possible Elliott wave count I have been tracking. The S&P500 unfolded as expected, and the final wave c appears to have completed a 5 wave structure to the downside. Looking across the market there has been maximum pain, especially in the crypto market, therefore I believe a relief rally will occur as sellers take a break.
SP500 4 Hour Chart
The S&P500 has reached the 3900 support zone, which is 1 -1 parity of wave A. Wave C can be similar in length to wave A. Therefore sellers may use this level as a take-profit zone. We can also count a 5 wave structure in wave c. In theory, a corrective rally should occur in 3 waves or a new 5 wave bullish sequence. Bullish divergence on the RSI 4 hour chart.
S&P500 1 Hour Chart
Trade Setup: BUY market execution, current price 3967, stop loss, 3847 and take profit target 4298.
Stop loss: 120 pips
Take profit: 331 pips
We are trading against the market sentiment so we will look to move our SL to open fairly quickly.