The July low that is. This week’s wild volatility has just painted a dreaded “broadening” pattern onto the charts. Here’s the daily SPY chart (click to enlarge):
The purple lines on the last two candles that connect the highs and lows from Wednesday and Thursday define the broadening pattern where, you guessed it, the price range broadens in both directions.
This is a very unstable pattern. We saw it before the lows set in January, March, and July. I last wrote about it here. Each time it has happened this year, the lower purple line has gotten tagged in the future. The slope of the purple lines show how sharply prices will move.
This chart is hard to read because there are a lot of bars on it, so you should make up one of your own to study this pattern more closely:
The broadening pattern in early July did not lead to a new low, but the lower purple line did get tagged in a scary plunge on July 28th. I think that that pattern did not lead to a new low because we had just set a pretty good panic low shortly before and were at the beginning of a new bear-market rally.
This week’s broadening pattern is pretty scary-looking because the lower purple line has a very steep angle. I’m thinking that if news-flow permits, we could get some follow-through to Thursday’s rally and run up to tag the top purple line, just like on July 23rd. And then turn down and head for the lower purple line, which will be a pretty steep dive.
Note: QQQQ has the same pattern. IWM couldn’t quite manage to push up the top of its range, and only expanded its lower range.
Yeesh. look at the volume difference between August and September on that first chart.
Cool chart. Not sure I ever would have thought to look for that type of pattern. It looks like it tends to touch that bottom line within one to two weeks of the pattern formation. We’ll soon find out if it holds true.
*Sigh*…I would be more bullish if I could think of something – ANYTHING – that could be perceived as good news coming in the near future. Anyone got anything?
Lol Towelie,
I guess here are a few bad ones:
-GOOG and AAPL held long term support – but it was expected
-Dollar is up which means the rest of the world is doing worse – but this will hurt US exports. This also lowers inflation and potentially means that the room now has more room to cut interest rates.
-Goldman Sachs got back above $155 so it held support. LEH might get bought out this weekend.
These are all pretty lame reasons though IMO.. lol..
Towelie all you have to do is listen to CNBC I heard the bottom was in as least 15x today
and matt with all the reports tomorrow and going into friday with WAMU and LEH probably still in the air i think tomorrow will be the huge decline.
i haven’t sounded optimistic since bear sterns. lol
There’s my problem! I don’t watch CNBC.
If I want someone to yell at me, I’ll call up an ex-girlfriend.
If I want to yell at the TV, I’ll turn on FOX News.
I have it all covered.
Remember the good ‘ol days? When a bailout of an investment bank was a good thing? Aaah the memories.
“we could get some follow-through to Thursday’s rally and run up to tag the top purple line”
That’d be great. I would go all-in again in SKF!!!
Sold them yesterday luckily before the close.
Your charts, Matt – loves it!!!
You know what’s great Matt? I noticed the same thing. Why does this make me feel good? Because I didn’t know it had a name! I learn things pretty much every time I visit you blog.
Btw, today’s buy/sell counts were terrible, considering the reversal and +1.4% on the indicies.
close
<a href=http://www.ibankcoin.com/dannyblog/wp-content/uploads/2008/09/both-lt.png<longer view
SKF@110 in premarket. Great!!! Hammer that beast down. SKF is a heart attack with a ticker symbol!!!
Matt,
Good observations! My other indicators also show bottom is not here yet.
We need more bulls: That is a bullish engulfing pattern and a double bottom with Tuesday’s lows!
Charlie,
I’ll give you GOOG, but $160 is the key number for GS. It actually went below its July low yesterday by a few pennies. Other banks (JPM, WFC) were much more impressive.
Also, we had our 3rd lowest opening in 34 months. Very bearish. However, the bulls strong pull (3.5% intraday swing) was very bullish. I do think it was thier last stand, but we’ll see.
SPX 1236 is critical weekly-close support going back to July and all the way back to July ’06; the next significant levels of weekly support are in the 1130s-70s, which I suspect we are about to see in the days/weeks ahead.
The 60m chart is already overbought and poised to roll over yet again.
Retail sales and yoy growth of social insurance receipts confirm that a recession is underway.
Be prepared for the bottom to drop out at any moment, i.e., not unlike 9/11 or summer ’02.
Setting up for SPX 1220s here . . . ???