Toni Hansen writes that on Wednesday the market returned to the earlier bias for a third low on the 60-minute time frame, which now creates a greater potential for a stronger move higher into next week.
Toni Hansen is still expecting further upside from this point on the daily time frames, with the 20-day sma and congestion from early last week serving as resistance.
Toni Hansen thinks that the odds currently are favoring a 2B on a 60-minute time, a form of double bottom whereby the second low is slightly lower than the first. This would create a nice shift in momentum that would allow the market to bounce back into the end of the week and beginning of next.
Both the S&P 500 and Dow Jones Industrial Average have established three waves of selling on the daily time frame. The Nasdaq has only had two waves since highs, so it can have a more difficult time correcting off lows and instead break to a third low on the daily time frame before it puts in a larger correction off support.
Toni Hansen thinks that the markets have room on Friday or into Monday to come back down into the week's lows once more, and can easily form a lower low, before they pull higher.
Toni Hansen notes that the weekly charts are all showing confirmation now and rolling over the resistance zone of the past two months, so there is a lot of room on those larger time frames for more downside this summer.
Toni Hansen thinks that the Dow might try for a slightly lower low as the week progresses. This will be particularly true if the downside momentum remains the same on Wednesday. A slightly lower low, however, has a decent chance to move the market higher again into next week.
The market is looking a bit bearish into the open on Tuesday on the 60-minute time frames. Toni Hansen is still looking at the week's action as a whole to most likely bring the indices higher, but it looks like it's going to continue to be a choppy climb to get there.
Toni Hansen is expecting more upside in the market this week as a reaction to the support zones which hit on Wednesday and Thursday and held into the weekend.
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