Since the 200 EMA support, the 23.6% Fibonacci retracement support and the 9700 milestone support are very close to each other I will use 9700 as the support that must be broken to confirm the megaphone formations. As long as this 9700 support stands the potential diamond formation remain a possibility. The chance of a green diamond forming is greater than a red diamond.
The Dow is in the midst of forming potential megaphone or diamond formations. These 2 formations are characterised by large swings in both directions as bulls and bears struggle to control the market. An erratic market behaviour is the main building source for both these 2 potentially bearish formations. However, diamonds sometimes are known to be continuation pattern. Dow strong close last night has averted the megaphone confirmation temporarily and it is trying to form a green diamond.
That is good news because it will move higher up away from the critical 9700 support.
The bad news is if this green diamond is a continuation pattern it will still turn downwards.
However, if the Dow can extend its upward movement and gradually reached the red dashed projection line it may have a chance to form a giant red diamond. The bad news is a diamond can be a bearish top. The good news is a diamond can be a continuation pattern. Market sentiment will ultimately decide the fate of this red diamond.
Meanwhile expect more wild swings in both directions.
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