Stocks Poised to Test 2016 Highs
03/02/16 Weekly Re-Lay Alert: “2016 Opening Ranges”
“Some indicators are primarily price-based (wave targets, HHL & LLH, etc.). Others are primarily time-based (cycles). The majority, however, incorporate facets of both time & price.
The MAC indicator is a perfect example, as it shifts during each period – a function of both price & time.
There is a 4th type of indicator – or perhaps it should just be viewed as a derivative of the 3rd one just cited – that is primarily price WITHIN a specific time period. It is a price indicator… with an expiration date.
The daily & weekly SPR & SPS, LHR & HLS, LLS & HHR, etc. are examples of indicators that are price-based but constrained by time.
Once the specified period of time has lapsed, that price indicator is no longer valid (with the exception of LHR/HLS, which maintains its influence for one additional period). Just because that time period expires, however, does not mean that indicator cannot still influence expectations for the ensuing periods…
A market that tests & holds a weekly LHR determines a key expectation for the weeks that follow – when an intermediate peak becomes far more likely.
Another example of this 4th type of indicator is the intra-period trend (period = day, week, month, etc.). As its name defines, this is more of a trend indicator than atrigger indicator. It helps identify the trend but depends on corroborating indicators to signal a specific trading strategy.
Within that indicator, the most important factor is the opening range. Once that is determined, a market needs to close above or beyond that range to identify the intra-period trend.
In the case of a month-opening range, the first 3 trading days make up that range. In the case of a year-opening range, the first 3 weeks make up that range. And that lays the groundwork for key analysis in several markets…
Stock Indices are one of those as they continue to rebound since reaching extreme support on Jan. 20th. As should be obvious, that spike low occurred during the first 3 weeks of 2016… a common practice during opening ranges. Stock Indices would need to give a weekly close below the Jan. 20th lows (since that pinpoints the low of the first 3 weeks of 2016) in order to signal an intra-year downtrend.
Some Indices retested those lows in early-Feb. – but never gave a weekly close below the Jan. 20th lows – fulfilling weekly cycles that aligned at that time (monthly cycles bottomed in Jan. 2016, so this retest was another textbook example of markets validating two distinct cycles without contradicting either).
When a market moves to one extreme during the entire (or majority of) opening range – but does not follow through after that opening range is complete – it often heads back toward the opposite extreme, to test it and see what it might reveal. That is how many of the Indices are acting with the Transports spiking to new intra-year highs.
It would take a weekly close above that high (7491/DJTA) to turn the intra-year trend up.”