If we look back to the 5/2/11 high and count to the high of yesterday it is 166 bars. From the 10/4/11 low to yesterday it is 58 bars.
58 Divide by 166 = .349
The Square Root of .349 = .591
The Square Root of .591 = .768
Now if you retrace the whole wave and add in the .786 retrace you can see yesterday we went up and hit it and closed a DOJI.
All this means that there is a bigger price/ time square on yesterdays candle.
One way to look at it is that this could be major resistance from the entire wave starting way back at 5/2/11 or if we break the high of yesterday that is where the bigger wave up will be confirmed and we would make a 3-4k point move up on the DOW.
These are bigger levels so even if we pulled back to 11,600 we could still go up and break yesterdays high and we would be off to a new high. Short term support on the DOW is 11,950 and bigger support is 11,600
The high of yesterday had short term time resistance and now that we have looked at the bigger pattern we see that it also has a price / time resistance on a bigger level.
* We have yellow bars on some of the weekly charts which means a big move is coming. It is a weekly chart so there can be multiple yellow candles so technically we could go sideways for what would seem like a long time before making the big move but each day we are getting closer to the big move and now we have a solid reason that the move could be to the downside. The key thing is waiting to see how the waves develop.
We would be careful on the long side until we hit at least short term support.
Happy Trading,
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