Weekly MACD Cross and Bullish Ascending Triangle

Dear Readers,

First of, a general zoomed out overview of price. The weekly MACD has re-crossed well below the zero-line signaling a turnaround in momentum. Price is still just in the LGC ‘buy zone’ signaling a macro buy for late investors looking for exposure. Price also shows a near 38% real correction of the cyclical move up. The overall picture is looking bullish after an extended correction. That said, this article will focus on the price action that has developed on the shorter-term chart.

Here we have the classic pattern of an ascending triangle knocking on the door of both horizontal and diagonal resistance. Given the formation of the pattern, one would have to at least half-expect price to break to the upside. What is the investor, late to the market and looking for some exposure, to do?

Given that price is currently just in [or very close] to the LGC ‘buyzone’ [the shaded area], and given that this buyzone has performed well for the investor since 2018, this would suggest a policy of continuing to average in, or to begin averaging in if not started already.

But Dave, the reader might ask, have you not been saying you expect one last dip to re-test the lows and the 0.38 fib level again, something that would be in keeping with a near year-long correction? Yes, but there is also a counter to that - given this market has been increasingly technical in nature, one without a parabolic spike, there is a good chance that the secondary capitulation, as per last time, may not play out.

This is what the LGC buy zone has always been about. Instead of trying to perfectly time or predict the market [near impossible on shorter-term volatility], one trusts the process of a longer-term model that has performed. An averaging in policy over a period of time, while price is within the ‘buyzone’, is considered good enough.

And if the market is an increasingly technical one [as opposed to parabolic], would then a classic ABC correction not make some sense? The point here is that a further correction cannot be assumed.

Consider also the contrarian nature of this ascending triangle. If it were to play out, it would take the market generally by surprise given that sentiment is currently so negative. Where the technical momentum indicator of the weekly MACD shows a turnaround, the momentum of market psychology is always lagging - lagging at the top, still bullish while price turns; lagging at the bottom, still bearish while price turns.

Assuming for a moment that this ascending triangle does continue to play out, then the technical target is 95K. This price would also be at a previous level of resistance. Such a move would also signal a macro turnaround in the market.

Until next time,

Stay [relatively] safe out there,

Dave the Wave.

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