Friday, October 23, 2009

Possible Triangle Unfolding

The above chart is of the S&P futures at a 1 hour timeframe showing a possible triangle unfolding. The up down up down nature this week without breaking significant new highs or lows puts this count as a top view. It's short term bullish because it means the market will rally Monday (perhaps Sunday night in the futures) in wave D, then drop in wave E (usually on a news event), then "thrust" from the triangle in a very strong and ferocious rally to new highs.

Even though this count is short term bullish, it is longer term bearish, very bearish. Triangles are always in 4th, B or X waves. This would obviously be part of a 4th wave, and therefore the "thrust" from the triangle will be a wave 5 and the end of a multi-week rally that started at the beginning of October. Thrusts are strong and fast affairs but they are also immediately reversed. Seeing as that we are looking for a significant top in the stock market, this "finishing move" resulting from a thrust from a triangle MAY mean that the market will for THE TOP at that time.

If the S&P trades below 1070.25 in the futures and 1077 in the cash market, then it will negate the triangle bullish scenario and put the bearish scenario at the forefront all by itself, implying that the crash may be underway.

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