2 replies to this topic

[4caster]

Since early June the SPX has been putting in a symmetrical triangle on the daily chart. When a symmetrical triangle occurs

after a meaningful move to the upside it's referred to as a Bull Pennant. The top of the triangle is 7620 and the bottom is 7275.

The breakout to the upside occurred last week at 7500. The theory is that the target price is equal to the distance between the

top and the bottom. In this case 7620-7275 = 343 points. And, the theory is that the price target is the breakout point + the

difference between the top and bottom, 7500+343=7845. Unfortunately, the theory doesn't make reference to any time frame

for the target price to be met. Also, I'm not aware of any data as to how many times a fake breakout has occurred.

[slupert]

Look at the $ndx chart for 2024 and these years. In 24 we played the rotation game an ran out of stuff for the NDX to rotate in to, then they just walked away.I was looking for a NDX top  as soon as next week and up to the last trading day of the month, how ever there is a possibility  the collapse of the rotation trade has already begun. If so, they'll just walk away. Lets give it until Monday though. To me the market operates on one basic rule, money always flows to where it is perceived to do the most good.. The rest of this rotation stuff is where money managers park money before the main attraction resumes.If they become disenchanted they'll just walk away., and raise large levels of cash. (JMHO)

[Douglas]

The classic tome on chart patterns, Technical Analysis of Stock Trends by Edwards and Magee, says the following concerning symmetrical triangles: "Price may move out of a symmetrical triangle either up or down.  There is seldom if ever, any clue as to direction until the move has actually started ... It is equally essential that an up-side break in prices be confirmed by a marked increase in trading volume... but a down-side breakout ... does not require confirmation by a pickup in activity..." 

 

Edwards and Magee go on to say that typically three out of four symmetrical triangles are consolidation patterns in which the breakout will continue the trend in place before the triangle with the fourth being a reversal pattern, and they warn that unfortunately symmetrical triangles are subject to false moves to a far greater extent than other formations.

 

Looking at the recent SPX action below and the above from Edwards and Magee, I see what appear to be two failed break outs of the green symmetrical triangle at the blue arrows both with insufficient volume.  The weak breakout that occurred at the second blue arrow now appears to be quickly failing with prices turning back down sharply below the breakout price.  Of course, the POTUS can always come out this weekend and say something to make this market turn on its heals and head higher, but from a purely technical analysis point of view, this looks bad.

 

 

Regards,

Douglas