In yesterday's Comment Section, hello said...
"actually, if you look at spx, it is forming similar broad top pattern. xlb just follows the index."
The Broadening Top is the pattern in black. Notice that after Black trendline #1-#3 was established, the SPX found resistance there on June 5 and again at the June 11 high. Off that June 11 high, we broke a Bear Flag, the 898.18 target got MADE, and we found support at the neckline of the 4½ month Bullish Inverse H&S pattern.
Within the Broadening Top, we had the H&S Top (in red) that morphed into the Falling Channel (in blue). The Channel breakout crossing 916.292 got us back to the top of the Broadening Top on July 30 where the SPX ran into validated resistance. The high was 996.68, right at the upper trendline, then the SPX eased off into a close of 986.75. That's the way that resistance should act, like it did at the top of the Bear Flag in June. The resistance was reliable. The Bear Flag broke, and the target got MADE.
On August 3, however, the SPX broke out of the Broadening Top to the upside, and CLOSED above it that day, and also for the next two sessions. That's at least a warning that that the validated resistance isn't acting as it should. Thursday, August 6, ahead of the jobs report, the SPX closed back below the upper trendline, but Friday's reponse to the numbers sent the SPX back above it, telling us once again that the upper trendline isn't acting as reliable resistance.
When that upper trendline was taken out again on Friday, and when last week's 1006-1008 SPX highs were taken out, The Bears were squeezed to SPX 1018. Although Cramer's comment of August 3 (at the top of the chart) was just a wee-ee bit late in the rally (LOL), I would suspect that more than a few Bears felt that way on Friday :(
By the way, we've discussed a number of times in the past that when a putative H&S Top gets taken out, the points from The Head (956.23) to the neckline (885.50) are IN PLAY on the upside. (the math is at the bottom of the chart). When we took out SPX 956.23, 1026.96 sure didn't seem very likely on this move, but we got to within nine points of that at Friday's SPX 1018. Whew!
7 comments:
Just a suggestion, but for a good learning experience if you get a chance or have the interest, go back and read my posts the morning of July 16 on the SPX Channel breakout, and the morning of July 17 on the NDX and Market Sentiment.
Back on July 15, a fellow that I admire at Traders-talk.com, who posts as IYB (I think his name is Don), posted that he got a Seven Sentinels Buy Signal (SSBS), but he overrode his signal and interpreted it as a Sell Signal, I think because he didn't get the positive divergences that he was looking for. Something like that.
I found his "sell" interpretation to be very interesting because we had just morphed the putative H&S Top into the Falling Channel breakout ON July 15 (see today's chart if you don't want to go back to the July posts). That breakout above SPX 916.292 put SPX 1003.20 IN PLAY, so I thought that his Buy Signal probably was good. It was.
This weekend, IYB posted that his July 15 Seven Sentinels Buy Signal, indeed, was good, and he now feels that we're in a Primary Cyclical Bull Market. So does Carl Swenlin at Decisionpoint.com, who is an excellent technical analyst. He's often on Timer's Digest Top Ten list. That doesn't mean that they'll be right, of course.
My main point here is that indicators and systems often can fool us. Where they can be very, very helpful, I think, is when they issue a Buy or Sell Signal COMBINED with a technical breakout or breakdown, like IYB's Seven Sentinels Buy Signal and the Falling Channel Breakout on July 15.
Although we never want to be foolish and go "All In," that was an "All In" Buy Signal. LOL. You'll see if you look at his price chart, those SSBS's and SSSS's have been pretty darned good!
Here's IYB's post from the weekend. Gosh, I admire people who work as hard as he does:
http://www.traders-talk.com/mb2/index.php?showtopic=109772
Good Morning, Melf
Thank you for your helpful response re Ichimoku settings.
I was pondering your post re AGU and the 'staff of elves' comment (8 August) - why not put in a price alert for a security that you are not watching avidly but would be interested in if it breached that point. So, e.g., for AGU once it had broken below the second neckline, an alert would have been put in at, say, price > $39. We would then be alerted to the stock making an unexpected move but also before it reached/breached the $40 area of the neckline which should have acted as resistance.
Further, I'm sure some of us here would be more than willing to follow some charts you identify and post a reminder when they meet criteria you consider interesting. Our way of contributing and saying thanks for the effort you put into this site.
Regards
Alex
Melf,
Busy weekend for you. Your tutelage exceptional as usual. Thnks for the effort.
Alex,
That's a great idea! I wouldn't have been interested in AGU if it simply got above the second neckline, so a particular price wouldn't matter in that case. It was headed into resistance without having formed a base.
Where I would have been interested is after the neckline formed, when AGU went down and put in that Right Shoulder. I simply had quit watching it back at the July 10 low when the H&S Top target got MADE, but if one of you guys had followed it and given an alert about that Inverse H&S forming, that would have been great! We would have had a chance at that 55/89RSI Buy Pivot (the candle circled in green), and also a chance at the neckline breakout.
Thanks for you input!
Thank you, Mark. I usually like to take it easy at the weekends, but I felt like working. I worry about having obsessive/compulsive disorder. I can't stop thinking about/looking at charts. LOL.
Thanks Melf!
I am using spx stockchart.com, it tells spx has not broken through up broadening top line yet.
Good Morning, hello,
That isn't correct. It broke out on August 3. Yesterday's close was still above it.
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