The pattern in purple is the possible Bearish Wolfe Wave that we've mentioned. The strong directional Lead-in is the rally from the July 8 low to Purple #1. The pattern that emerges after the Lead-in should be in the same direction, and it is. Ideally, for this to be a Bearish Wolfe Wave, the rally to the 1074.77 would be the Wave 5 Fakeout/Breakout, putting the proverbial everyone wrong-footed. Bears get stopped out and have to buy to cover the breakout. Bulls buy the technical breakout. "Everyone" is a buyer at the wrong time because the market reverses to the downside, and usually quite sharply. That's the ideal bearish scenario.
All of that needs to be viewed in the context of the entire chart, which is very bullish. We need to keep in mind that the putative H&S Top (in red) was a huge Bear Trap, and that the putative Broadening Top (in black) wasn't a Broadening Top. The first selloff on the break of the Descending Triangle (the little pattern in red), from Purple #1 to Purple #2, was another Bear Trap. After the selloff from Purple #3 to Purple #4, finishing off what looks like a Bear Flag/Bearish Wolfe Wave/Rising Channel, we've ripped to the upside again. Merciless for The Bears.
Technically, yesterday the SPX closed back inside the putative Bearish Wolfe Wave, so the Wave 5 Fakeout/Breakout setup is in place. The top of the pattern came in at 1067.38. The close was 1064.66. The slope of the trendline of the top of the pattern is 1.646, so we add that amount each session. The SPX would need to close today above 1069.03 to regain the breakout (1067.38 + 1.646 = 1069.03).
5 comments:
Melf,
I noticed that the ARNA trade that
you posted on yesterday was a much longer term hold than those on which you normally post. Would you comment on the differences in your thinking and analysis when making a longer term trade vs. a short term one? Thanks
Good Morning, Mark,
I often trade off intraday chart breakouts and breakdowns, so those are much shorter-term plays. The ARNA trade was off the daily chart, and it wasn't a big position in dollar terms, so I played that for the bigger targets in the $6-7 range and longer-term than than those off the intraday charts.
Melf,
So is the bearish wolfe wave in SPX invalidated with today's close above 1071?
Hi Melf
Have you seen US Steel (X) lately? Looks like we missed a head and shoulders bottom. Look at a 1 year chart. It has had a breakout and a retest of the neckline.
Good Morning, Joe,
I suppose that it could be a Double Fakeout to the upside, but that isn't usual for these patterns. It isn't acting reliably for The Bears, similar to what we got with the Broadening Top pattern this summer.
Post a Comment