I suggested last time that:
We may start the next week with another possible attempt lower.
This was on the back of a Bearish Shooting Star Pattern in late August. This turned out to be the case and the market followed through for a few days thereafter and actually started the formation of another pattern that has been key in recent days. I also added at the time that:
Due to my cautious nature, I'd say that if we were going to go higher then we ought to have done it this week...or maybe next week. Otherwise I'd be concerned for a test of the Lower Tine.
Longer term that seems to have been also the case. However, only a few days after writing we had one final try higher, which again ended with another Bearish Shooting Star pattern.
This on the top of the market...just...before we came down. There was one further attempt up but this did not manage a new high and failed with a magnificent Key Reversal Down (you can see it marked on the Daily Chart). This action actually formed the final portion of the new pattern I'd previously mentioned - a Head and Shoulders Top! Only two days after the KR Down we saw prices breach and break down through the Lower Tine of the all-important March - April Bullish Andrews Pitchfork that has run this market for most of this year.
I cannot emphasise how important this break down was. We've since seen prices follow through lower...though not to the full anticipated Shoulder length, down to about 1.1660. Instead, we've only come down to the first Fib support, the 38.2% Fib of the June - Sep move at 1.1720 before turning up last Thursday and following on Friday. Now to drop and recover up to the Neckline (currently 1.1854) is perfectly reasonable with even a small overshoot higher.
However, if this H+S Top is to be genuine then the move up should taper and prices fall again...in this case down to the possible target area of around 1.1580, marked with an 'X' on the Daily Chart above. It could be that the action does cause the market to go higher and that we've this H+S Top acting as a smaller H+S Top within a larger H+S Top forming since last July (I hope you're following this)...we're now working on the 2nd Shoulder if this is true.
However, that is just conjecture (though informed) at this moment. What it does mean is the Bullish AP is no longer valid and I will be taking the current one off the Daily Chart next time. Overall, expect further limited tests high before a turnaround. If the try higher becomes stronger then the concept of the H+S within a H+S is likely...in both cases they indicate currently weaker markets though after tries (extended in one case) higher. With this in mind, I have moved the bullet point above down to Mildly Bullish.
Support is currently at 1.1720, 1.1661, 1.1605 - 1.1614, 1.1568 (dynamic) and 1.1510 - 1.1466.
Resistance is currently at 1.1821, 1.1854 (dynamic), 1.1951 (dynamic), 1.2004, 1.2031 and 1.2039 - 1.2108.
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