Thoughts on the US equity market this week...

FX:US30   Dow Jones Industrial Average Index
169 0 2
Weekly gain/loss: - 446 points
Weekly closing price: 18043

Weekly view: A succession of offers flowed into the market last week, resulting in prices punching through the support area at 18365-18158, consequently closing the week on its lows. Further selling from this point could potentially drag the equity market down to a support area carved from 17446-17606.

Daily view: Daily action on the other hand closed the week just ahead of a broken Quasimodo line at 18018 (converges with a trendline support extended from the low 15501). Support barriers such as these have a high tendency to bounce price, so do be prepared for a rotation back up to the underside of a resistance area at 18186-18117 (houses the lower edge of the above said weekly resistance area ) sometime this week.

H4 view: A lot of eyebrows were likely raised on Friday following the aggressive selloff that took place. Concerns that the Fed may raise interest rates was thrown out there on Friday, causing US stocks to post its biggest single day’s loss since June 24. Several H4 tech supports were wiped out during this bearish onslaught, ending with price closing the week at the top of edge of a H4 (kink) demand seen at 17993-18043, which happens to surround the daily broken Quasimodo line at 18018 and merge with a H4 38.2% Fib support at 18050 (green line).

Direction for the week: Going by the weekly chart, one would likely guess that the candles are headed south given the strength of last week’s close. However, although we’re not expecting price to aggressively rally from the current H4 demand base, we do believe it will hold prices due to its connection with the daily broken Quasimodo level.

Direction for today: As already mentioned above, we feel higher prices are likely to transpire from the current H4 demand base.

Our suggestions: Despite the weekly chart, we are going to hunt for a buy entry around the H4 demand base today. We’ll be looking at the lower timeframes for confirmation in the form of either an engulf of supply followed by a retest or simply a collection of buying tails off of the H4 area prior to pulling the trigger. This will, at least for our team, be sufficient enough for us to condone a long entry, targeting the underside of the daily resistance area at 18117 as our immediate take-profit zone.

Levels to watch/live orders:

• Buys: 17993-18043 tentative – lower timeframe confirmation required (Stop loss: dependent on where one confirms this area).
• Sells: Flat (Stop loss: n/a).
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