As I wrote in this morning’s post, the market needed to digest or consolidate after yesterday’s sell-off… and that’s what we’re seeing now.

The market intraday has formed a near-perfect symmetrical triangle with clean boundaries you should watch as short-term reference levels.

According to the Range Alternation Principle, markets alternate between periods of range expansion (yesterday’s massive sell-off) and range contraction/compression (today’s triangle).

Thus, as wild as the market seems, it is still following time-tested price principles.

For now, monitor the index level of 1,120 as the overhead resistance trendline and 1,110 as the rising lower support line, with 1,115 as the “Value Area” the market participants have so far agreed as ‘fair value.’

We could see range expansion pick up again if we get a firm break of these areas, but for now, it might be helpful to see the triangle pattern and watch its boundaries as it continues to develop.

Corey Rosenbloom, CMT
Afraid to Trade.com

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