June Dow Jones futures traded below the prior swing low on June 8th. The market was trading out of a three -wave continuation pattern and the new low suggested a continuation of the downward trend. However, the market stalled and began to erase all the daily losses and finally closed above the previous low close and at the high of the daily trading range. The swing pattern failed due to lack of sellers causing the bears to cover shorts and move to the sidelines. A swing pattern failure – also know as a peg-leg bottom – will typically be followed by a significant price move in the opposite direction. It is time to begin looking for a confirming buy pattern to enter the long side of this market.
