BarroMetrics Views: One Day Reversal?
Q: When is a one-day reversal not a one-day reversal?
A: (Tongue-in-cheek) If it does not occur at a Barros Square (G)!
I am not a fan of a the one-day reversal pattern UNLESS it occurs within a context that supports the reversal. This is different say to a Head and Shoulders pattern where I am more likely to sit up and take notice even if not within a zone of reversal.
I mention that one-day reversal because we saw the pattern on Aug 3; and while the strong volume that day did cause me to pause and reflect, I decided that that one-day reversal was a bear-fake. There was nothing to suggest in the structure or zone that the down move was likely to terminate.
Yesterday’s one-day reversal is a totally different ball game:
- FOMC is due tonight and I expect the FED to say something to boost the market. Rob Hanna’ great study “Guide to Fed Days” shows the strong bullish edge for today.
- The S&P is at a Square Support.
- The price action of Aug 8 suggested we’d see a bounce on Aug 9.
The question now facing a trader is: assuming a bounce, where can we expect resistance?
FIGURE 1 shows the most likely candidate is the zone 1225 to 1220. This is a zone where the retracement of the down move and the Primary Buy Zone of the prior congestion meet. (All prices cash S&P).
I do have a cycle low due Aug 25 to Aug 29 and a cycle high end Sept/early Oct.
FIGURE 1 Cash S&P