Monday, April 20, 2009

Looks Like an Ending Diagonal Ended, but Prior Count Unclear; April 20, 2009

From an EWP perspective, it seems clear that an ending diagonal pattern just completed (see above futures chart). Notice the above 4hr S&P futures chart above shows the choppy hard faught rise from March 20th 762 low takes the form of a very nice "ending diagonal" after the decline today. You can see that the pattern is clear and adheres to EWP's rules. In ending diagonals, the are usually followed by a sharp reversal that wastes little time retracing back to at least the beginning of the diagonal. In this case, that area is the 775 level in the S&P futures (see chart above). So after breaking below the parallel trend channel I mentioned in the previous post, I expect the index to charge immediately lower to the 775 where a bottom MAY form.

I remain short the S&P, XLF and various tech stocks (CSCO, INTC and ORCL) through option bear spreads.

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