A very simple chart with very simple notations.
There are two zones here... One before the plunge in early may and the one we are currently in.
Zone 1 is in BLUE and Zone 2 is marked in brown.
Similarity in pattern between zone 1 and zone 2 CANNOT be a coincidence. This chart is much more scarier than it looks. Chart pattern we are currently in, looks horrifically similar to what we saw before the early may decline that wiped out 210 points.
However what we see now is that the size of that consolidation/distribution has increased by almost 4 folds. And the coincidence just doesn't end there. The actual numbers too match up just fine...
2nd trough from zone 1
1218.26-1183.71 = ~2.8%
2nd trough from zone 2
1130.89-1014.39 = ~10.3% (~4 times)
3rd trough from zone 1
1208.57 - 1183.71 = ~2%
3rd trough from zone 2
1097.66 - 1014.39 = ~8.2% (~4 times)
4th trough from zone 1
1204 - 1188 = ~1.5%
4th trough from zone 2
1083.49 - 1062.13 = ~2% (~ the same)
Basically we have 2 exact troughs and one minor one which didn't even make it as much as the previous one.
What followed was a massive 210 points down. Does this mean we will get something like ~4X210 = 840 points down on SPX? That cannot and will NOT happen. Not at least practical. And since i am NOT a big proponent of "gloom and doom" and "crash theories", the only thing that i can say is that the above chart is too coincidental to be ignored. This suggests we are going to see BIG moves to the downside.
Now, whether this actually happens or not is a different story.
PS: The above article is NOT related to our investment/trading methodology and charting. It is merely an observation that was just too much to be ignored and hence i thought of putting it up for others to grab.
GLTA
Interesting, thanks - although as you allude, these things seldom pan out!
ReplyDeleteCompletely agreed. We do NOT trade using such information either as we follow our own models. However, 4 troughs modeling alike was a bit too much of a coincidence and thought of putting it out there. :-)
ReplyDeletewhat a brutal drop today on DRV, your comments? thank you
ReplyDeleteSince we do NOT modify our portfolio once it is locked, we are unable to take more action. But if we had the option, we would add more here. We are clearly forming bottoms (double and triple) here. Technically, we are still making higher lows and all indicators already have positive divergence.
ReplyDeleteRegardless, we do NOT trade on daily/intraday basis. We have set our goals and we exit a) if they are met or b) if our charts/analysis suggest we should exit.
At this time, neither happened.
However, we wouldn't advice our readers to blindly follow us. Please use proper stops in place at all times and trade according to your risk appetite.
Since we do NOT modify our portfolio once it is locked, we are unable to take more action. But if we had the option, we would add more here. We are clearly forming bottoms (double and triple) here. Technically, we are still making higher lows and all indicators already have positive divergence.
ReplyDeleteRegardless, we do NOT trade on daily/intraday basis. We have set our goals and we exit a) if they are met or b) if our charts/analysis suggest we should exit.
At this time, neither happened.
However, we wouldn't advice our readers to blindly follow us. Please use proper stops in place at all times and trade according to your risk appetite.
thank you for the honesty. so your chart/analysis is not lagging indicator? you know when i read the technical analysis, some of them are.
ReplyDeleteA close below 31.5 on DRV will invalidate our setup and we will exit all shorts is what i can say at this time.
ReplyDeleteEven with today's rally, it brings the latest peak closer to the previous peak, just like it was with the last two peaks in April. Still don't know if it means history will repeat itself, as in starting the drop soon.
ReplyDeleteThere is A BIG MISTAKE in your calculation of :
ReplyDelete3rd trough from zone 2
1097.66 - 1014.39 = ~8.2% (~4 times)
SINCE AFTER 1097.66 on your chart, SPX never went to 1014.39 a second
time (yet!!)
-- your chart says 1097.66 - 1062.13, AS THE 3rd trough from zone 2.
thanks.
There is A BIG MISTAKE in your calculation of :
ReplyDelete3rd trough from zone 2
1097.66 - 1014.39 = ~8.2% (~4 times)
SINCE AFTER 1097.66 on your chart, SPX never went to 1014.39 a second
time (yet!!)
-- your chart says 1097.66 - 1062.13, AS THE 3rd trough from zone 2.
thanks.
1104 is the key. It will take it to ~4% range. But it doesn't have to kiss that. Never know.
ReplyDeleteNaming could be OFF (troughs). But the numbers are clearly visible for you to confirm on the chart borrowed directly from stockcharts.com. This isn't something that i created. :-) So, yes, all of the info presented in this article is correct and you can do the correlation yourself.
ReplyDeleteGL
DRV closed so many times below 31.5 in last 3 weeks, I've lost the count.
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ReplyDeleteoptions Trading
This blog Is very informative.I am really pleased to post comment on this blog.Thanks for sharing.
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