SPX: Back-To-Back Targets

Review of the rationale behind, and the math for, the Descending Triangle, from the August 22 Comment Section:

For the same reason that we added 70.73 points to the 956.23 high of the H&S Top pattern when it got taken out to the upside (see the math at the bottom of the chart), we add the measured move of the Descending Triangle to the point of the upside breakout, which occurred crossing 1007.20 at the open on Friday.

1018.00 - High of the triangle
992.49 - I always use the more conservative of the two lows, which were 992.49 and 992.40.

1018 - 992.49 = 25.51 points added to the breakout point, 1007.20.

1007.20 + 25.51 = Target: 1032.71 IN PLAY

The Descending Triangle target of 1032.71 got MADE eight minutes into yesterday's trading. Combined with the H&S Top target of 1026.96 that got MADE on Friday, it's important to note that we've had back-to-back upside targets that got MADE from patterns that initially broke down and looked bearish!

If you haven't been already, you'll be reading and hearing things like, "Technical analysis doesn't work." "Technical analysis doesn't work in a Bear Market." "My indicators aren't working." "My system isn't working."

The problem isn't with technical analysis. The problem, in my view, is an over-reliance on indicators and systems, wanting them to TELL US what to do. PREDICT what the market will do. They can't. All that they can do is give us "some reading," and we have to interpret that reading based on what the price chart is doing.

Regardless of what any indicator or system was telling us at and since the July bottom, we've known that Ms. Market was telling us:

1. July 8-10 - I have found support at the retest of the neckline of the Bullish Inverse H&S ("Retests of breakouts are common, and are to be expected").

2. July 13 - I have CLOSED back above the 893 neckline of the putative H&S Top.

3. July 14 - I have taken out the top of the blue channel, crossing 916.292, and I have CLOSED above the channel, putting 1003.20 IN PLAY. I also have CLOSED at 932.68, above the 931.92 high of the Right Shoulder of the putative H&S Top ("The high of a Right Shoulder shouldn't get taken out to the upside, and if it does, shorts are not favored").

4. July 21-22 - I have taken out the 956.23 high of the putative H&S Top on an intraday basis.

5. July 23 - I have CLOSED well above 956.23 on a big white candle, putting 1026.96 IN PLAY.

You get the idea, so we'll stop there. I would imagine that more than one indicator or system was flashing a sell signal at that point, or shortly thereafter, since we had rallied 100 points off the July 8 low, and parabolically, but we've tacked on another 60 points since that July 23 close.

There never was any guarantee, of course, that the 1003.20, 1026.96 and 1032.71 all would get MADE, but we knew where and why those targets went IN PLAY, so we have at least some understanding of how the SPX has gotten here, and some understanding that there was a technical basis for the rally regardless of what we might read or hear to the contrary.