If it breaks above the cup, then it will be an amazing breakout, but if it doesn advance then we will feel the handle.
S&P 500 intermediate term top 1532.43
- Thread starter michaelscott
- Start date
If you're calling that triangle saucer thingy a cup and looking for a handle that doesn't exist you can call me Dennis Rodman and I'll sure as hell tell you I'm not a 7' tall African American male with a hundred piercings or Carmen Electra on my arm or any other 'limbs'.....
There is another chart that I am not showing you and I call it "the black line" chart. If you know about the existence of the 2 thick black lines, then the last 20 years makes perfect sense.
The chances are the market will not violate the lower black line and if it does it could either be a bear trap or the end to the bull market. There were many crazy events in history where the reasons for lower black line violation were there, but it only happened once and that was a bear trap.
Twice in the history of the black line has the upper line been violated and those times were 1987 and 1996. One time was a bull trap and the other time was an incredible breakout which resulted in a run of 300% in 4 years.
There are many possibilities, but knowing that the black line exists limits the different end results.
What we do know about 1987 was that there was some economic trouble that revolved around that particular time such as issues of recession....
http://en.wikipedia.org/wiki/Late_1980s_recession
The 1996 violation occurred because of a sudden pickup in the economy and productivity. The pullback back to the black lines was caused by a slowing of that same growth.
Therefore, I believe the following end-results will be likely with the SPY. A pullback to the 1400 level followed by an advance over the top black line leading to the 2200 level within 4 years.
The advance over the black line needs to be monitored carefully as the same conditions that exist in 1987 do exist today. We know that an advance might either lead to a grand bull trap or a breakout.
The catalyst event that caused the 1987 crash was computerized stop-loss orders and I will illustrate this fact in a following post on this thread.
The chances are the market will not violate the lower black line and if it does it could either be a bear trap or the end to the bull market. There were many crazy events in history where the reasons for lower black line violation were there, but it only happened once and that was a bear trap.
Twice in the history of the black line has the upper line been violated and those times were 1987 and 1996. One time was a bull trap and the other time was an incredible breakout which resulted in a run of 300% in 4 years.
There are many possibilities, but knowing that the black line exists limits the different end results.
What we do know about 1987 was that there was some economic trouble that revolved around that particular time such as issues of recession....
http://en.wikipedia.org/wiki/Late_1980s_recession
The 1996 violation occurred because of a sudden pickup in the economy and productivity. The pullback back to the black lines was caused by a slowing of that same growth.
Therefore, I believe the following end-results will be likely with the SPY. A pullback to the 1400 level followed by an advance over the top black line leading to the 2200 level within 4 years.
The advance over the black line needs to be monitored carefully as the same conditions that exist in 1987 do exist today. We know that an advance might either lead to a grand bull trap or a breakout.
The catalyst event that caused the 1987 crash was computerized stop-loss orders and I will illustrate this fact in a following post on this thread.
Now here is a graph of the 1987 breakout over the top line. Its easy to see why the crash had taken place. The market went out of a major trend channel. Computer programs then set the stop-losses at a very logical point as you can see on the chart.
There was a double bottom on the top line followed by an advance. The computers set the buy point right above the top line in 1987 and that caused the double bottom (theory of resistance becoming support). Then the market moved higher above another trend line. Then this became another buy point, but a stop-loss point was set at the macro trend line.
The catalyst that caused the gap lower was the Asian markets. There was a panic in the Asian markets and then it hit Europe and then it hit the US.
The wave of selling is a natural event. When the Asian markets sell off, then there are investors that must meet margin calls so other equities are sold off to meet those calls. When the US market gapped down, then the computers sold the US market off due to the stop-loss orders that were set due to a trend-line violation. This caused the crash.
There was a double bottom on the top line followed by an advance. The computers set the buy point right above the top line in 1987 and that caused the double bottom (theory of resistance becoming support). Then the market moved higher above another trend line. Then this became another buy point, but a stop-loss point was set at the macro trend line.
The catalyst that caused the gap lower was the Asian markets. There was a panic in the Asian markets and then it hit Europe and then it hit the US.
The wave of selling is a natural event. When the Asian markets sell off, then there are investors that must meet margin calls so other equities are sold off to meet those calls. When the US market gapped down, then the computers sold the US market off due to the stop-loss orders that were set due to a trend-line violation. This caused the crash.
Now here is the chart from 1996. You can see how 1996 could have very easily been another crash. The blue line is where the top black line resides. You can see where the market sold off right to that line during the summer of 1996. Fortunately, the stops this time were set a little bit lower.
If there is to be a violation of the macro resistance in the future, then there can only be two results which are a breakout to 2200 or an event that will resemble a crash.
In 1987, it took several months after the breakout above the top line for there to be a reversion.
The one thing we can draw from all this is the two black lines are extremely powerful and any price movement over it will most likely be met with a reversion of an indeterminate amount of time.
If there is to be a violation of the macro resistance in the future, then there can only be two results which are a breakout to 2200 or an event that will resemble a crash.
In 1987, it took several months after the breakout above the top line for there to be a reversion.
The one thing we can draw from all this is the two black lines are extremely powerful and any price movement over it will most likely be met with a reversion of an indeterminate amount of time.
If EW and Fibonacci can be counted on then I say we will go higher yet. On the MAcro scale the ABC correction has come at regular intervals....this interval regularity has seemed to come a little later each time lately ( since Oct 2005 ).
On a micro scale we have wave 3 EW and are about to complete wave 4 retrace.....which still leaves wave 5.
Mathmatically :
1461.57 - 1363.98 = 97.59
97.59 x 1.618 = 157.9
157.09 + 1461.57 = 1619.47 ( our target )
We have already seen 1532
Each prior wave , however, did NOT meet the 1.618 rule before the correction (ABC)....so it will most likely be a bit short this time as well...... say 1600.
Since the price line is well OFF the 40 week MA it is evident that higher is where we are higher. Would expect the ABC correction to be to just higher than the previous wave peak (1461)... I'll say 1475. We shall see!
rphuga89
On a micro scale we have wave 3 EW and are about to complete wave 4 retrace.....which still leaves wave 5.
Mathmatically :
1461.57 - 1363.98 = 97.59
97.59 x 1.618 = 157.9
157.09 + 1461.57 = 1619.47 ( our target )
We have already seen 1532
Each prior wave , however, did NOT meet the 1.618 rule before the correction (ABC)....so it will most likely be a bit short this time as well...... say 1600.
Since the price line is well OFF the 40 week MA it is evident that higher is where we are higher. Would expect the ABC correction to be to just higher than the previous wave peak (1461)... I'll say 1475. We shall see!
rphuga89
Your analysis is flawed. The Sp00z is driven mainly by FUNDAMENTALS and not technicals, as is the DOW and to a somewhat lesser degree the nasdaq.
I have to disagree with the premise that "fundamentals" are the driving force. Sentiment is always, always the driving force. Sentiment can be influenced by fundamentals, world events, presidential cycles, what W Bush said last night, what China does or doesn't do next, fluffy PR, pumpers and bashers, etc....
Sentiment moves the train, technicals are the time schedule that tells where the next start/stop is.
Measuring how sentiment is leaning will always tell you where the money is moving to.
Technicals track the money flow....in or out.
Since the DOW and NASDAQ are made up of individual components, they are subject to be measured by the same technicals that the individuals are measured by.
Fundamentals only give you some reason to want to get on the train. Once you are on, the sentiment keeps you on....or makes you get off.
If you can see it on a chart, you can track it with technicals.
Sentiment moves the train, technicals are the time schedule that tells where the next start/stop is.
Measuring how sentiment is leaning will always tell you where the money is moving to.
Technicals track the money flow....in or out.
Since the DOW and NASDAQ are made up of individual components, they are subject to be measured by the same technicals that the individuals are measured by.
Fundamentals only give you some reason to want to get on the train. Once you are on, the sentiment keeps you on....or makes you get off.
If you can see it on a chart, you can track it with technicals.
Presidential cycles will change, sentiment will change, but the only variable that tracks the rise in the S&P is revenue. There is a direct correlation between revenue and the s&p. Negative sentiment may cause the S&P to drop but increasingly strong earnings will keep it going higher in the long term.