COW, Trendlines Are Back in Fashion

The corrective period has taken so long and I've been focused on other analysis techniques that I almost forgot about the humble trendline. Lying awake at 3:00 am last night it occurred to me to plot the silver trendline which I blogged about yesterday. Today it occurred to me to take another look at COW.

Pretty tasty. Today's action stopped dead at the trend line. Draw a parallel return line and you see a pretty interesting situation. The return line crosses at several key support or resistance areas. What I believe the return line also tells us is that the big wave was in fact a 5th wave. This entire structure should be a 5/3/5. This would then put us somewhere in the second 5. Where? Either finished or 1st wave I think. Wow, that's saying nothing I know.

Let's look out our indicators:

Uh oh! Bearish divergence on the intermediate trend (small red bars). Negative reversal on the big trend (big red bars).

Asleep at the wheel again I was. We also got perfected DeMark signals at both of these peaks.

That said, yesterday's red bar created a gap. COW then bounced neatly off the trend line. I wouldn't be surprised to see that trend line broken but then I think COW may actually just sort of skid against the line if the market drops tomorrow. I would then expect an uptick to cover the gap it left behind. That would briefly lift RSI and set up the actual collapse.

In fact on the 60 minute chart we have positive reversal on RSI!

Not only positive reversal but the composite is deep in negative territory. Probability is high that we get a good bounce here which will set up a terrific intermediate trend and possible major trend short.