Well this is all looking familiar. Yesterday closed down hard after a day of relentless selling with a close just under the 200 DMA, and SPX is looking set up to gap up big overnight. Is it Groundhog Day? No, I don’t think so, though the similarity is certainly very striking. At the end of the day though yesterday was just a very odd looking inside day, with no break either of Wednesday’s high or low, SPX daily chart:
The inside day is part of a triangle which it is now obvious that SPX has been forming for much of the week. This means that the double bottom that I was looking at yesterday morning is still in play, but there are now two other pattern targets lower, both of which are higher probability. I’m expecting a break up and the targets for that are on the chart. In the less likely event (IMO) of a break down, then the triangle target would be in the 2015 area, which is a match with the H&S target I posted last week. After the thrust out of the triangle there is then a better than 90% probability (Stan’s stat) that the thrust will then be fully retraced in the next few days, which favors a fail at one of the 2093 or 2103 targets, in effect either a fail at the daily middle band of the 50 DMA. SPX 15min chart:
I don’t much care for triangles and have said so here many times. Stan has been showing me his take on triangles for the last few months so though, and I have now found triangles of the kind where the triangle is mirrored on the RSI 14 to be a reliable pattern for trading. This is one of those. Any false break out from this triangle should be obvious as the triangle on RSI shouldn’t break with it. When there is a confirmed break in either direction I will tweet the confirmation soon after, though in practical terms any break above yesterday’s high at 2074.28 in trading hours will strongly favor an upward resolution.
I’ll be doing at least one post at theartofchart.net today. I’ll be doing an update post on URA and may do a second if I have time. Everyone have a great weekend 🙂
