Phase 1 Aborted!

A quick update on US Indices….

As a discretionary rule-based trader,  it’s important that I revise my interpretations to new facts. One key error I see newbies make is to re-interpret facts to fit their theory.

In “Phase 1 in Play!”,  for the S&Ps, I was looking for lower prices to the Primary Buy Zone, the area 2576 to 2533.

Given that the prices had closed below 2789 (Value Area High) with volume and momentum, we should have seen the index move to 2645 (Value Area Low without accepting above the VAH).

Instead on Tuesday, that’s what we saw – acceptance above the VAH.

(Note I was unable to access my cash S&P, so I have used a CFD chart instead)

I could stick to my view that the boundaries of congestion I have drawn define the price action. Or I could seek another explanation.

One possible interpretation is since the low on Feb 6 2019, the S&P has been forming a running sideways pattern.

If this interpretation is correct,  we’ll see prices head to the 3rd standard deviation boundary (black and red lines, Primary Sell Zone). We can expect choppy action between the 1st deviation (blue lines, Value Area). Since this view better fits what happened, for now, I’ll be looking to be a buyer on dips.