9/30/11

First, I need to punish myself for having made a dimwitted trading decision.  I figured we might have made a temporary bottom when we dipped below 1139.93 for the first time today and rallied - so I went long SSO expecting something on the order of a Minuette (ii).

It of course didn't happen.  I should have known better.  Because even though the RSI was improving, we were still stuck by that thick green line which is losing 15 points per TD and has shunned every top since 1195.86.  Until and unless that line is breached to the upside and retested, I shouldn't even be thinking about going long.

Figuring out the bottom channel line is trickier.  The thin green line is the channel parallel to the thick green top starting at 1169.54 - the Sept. 28 close overshoots that; lower it by about 5 points if you want to use that line.  The red line suggests an expanding wedge, and it crosses 1100 on Monday.  The lower blue line is the least bearish of several bearish options, which suggests a contracting triangle the apex of which is on October 8 at well below 1100.

The thick black line, which crosses 1180 Monday, will, I think, provide major resistance to any up move.  If it is breached, a bearish case is still technically intact up to the burgundy line but if that breaks it is probably Minor 2 / Intermediate (2) underway up to the upper 1200s, if not a full-blown bull market.