Over the past two weeks I’ve been writing to the beta-testers and subscribers of my trading service, Cycle 9 Alert, about the current state of the market. And I’ve been telling them that we’re at a critical turning point!
Round numbers and psychologically important levels tend to bring investors, both bulls and bears, out of the woodwork. With the Dow Jones Industrial Average batting around the 14,000 level… and the S&P 500 poking above 1,500… there’s a major battle being waged between buyers and sellers.
I’m fully expecting equity markets to move higher into May. Yet price weakness over the past few days is a worthwhile reminder that a short-term dip is due. That’s why it makes
sense to figure out at what price the smart money will start buying again.
My estimate is between 13,450 and 13,600 on the Dow, and around 1,460 on the S&P 500. Take a look…
If the current selloff continues, bullish investors will have a dip worth buying. I’ve marked these “Buy Zone” levels with green lines.
But why those two levels? They’re important for two reasons. First, they represent the 38.2 Fibonacci retracement levels of the most recent uptrend. When short-term dips occur in uptrends, prices typically fall to this level before turning around and moving higher again.
Second, these “Buy Zone” levels also represent prices that acted as resistance in the past. Once these levels were broken, with prices moving much higher, they become levels of support where buyers are likely to become active.
During the past two days we’ve seen heavy selling. I wouldn’t be surprised to see the dip take prices a bit lower over the next couple of weeks as the bulls take profits.
When this happens we’ll have the chance to buy at a discount. Be ready.
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