We had a nasty whiplash storm in the last hour of trading today. I don’t know if there is a definitive way of forecasting these storms, but it is critical to avoid trying to daytrade inside of them as they will slice you to ribbons.
One way to anticipate whiplash is to watch for when prices move into the apex of a triangle. I think today’s whiplash was caused by an ascending triangle on the SPX’s 60-minute chart (click chart to enlarge):
The blue uptrend line formed a triangle with the red, horizontal resistance line today. The whiplash kicked up as prices moved into the apex of the triangle around 3pm (blue circle).
Also, if you recall, we had the same sort of whiplash a week ago on June 2nd. And sure enough, we see the same pattern, this time with the green line. So, if you are a day-trader, print this chart out and tape it to your refrigerator.
Prices fell out of the triangle last Tuesday just like they did today. So, maybe shorts will be treated to another gap down tomorrow just like we had last Wednesday. Of course, the key to a triangle “fall out” like this is where prices bounce next. If they can make another higher low, say around 932, then another run at the top will be almost guaranteed. A breach of the lower end of the range at 925 would likely put a new high out of reach for a while.
A retrospective of the Fannie melt down.
http://www.youtube.com/watch?v=cMnSp4qEXNM&feature=related
The market has spent a lot of energy in this zone. If it breaks to the upside, that will actually be good in the long run in order to have a greater move down.
Matt,
I’m leaning toward the higher low, i.e. some downside in the triangle, and then a bit more upside. Charts I’m developing to try to find tops (sans EWT) currently all look unfinished to the upside. However, it looks like we’re close. Still looking at 963-1008, with heavy resistance at 980-990. Doesn’t seem like the powers-at-large will let this die at 963. Seems like they also want more time to allow the various bank offerings to complete, so it may be partly about time and not just price. Also, it seems that institutions would like to stealth-sell as much as possible, meaning not overdo it just yet. GM-trading makes sense with so many sharks in the water.
I can totally live with it if the market would like to prove me wrong here and just TANK. May I please turn the SGA back on soon?
junglegirl, nice summary. daxwise I see heavy resistance at (converted to spx) 975-985.
Markets continue to defy analysis – of course the push above 950 is happening during European trading. Caveat, dax is moving up along the lower boundary of a rising wedge – do bearish patterns matter?
@Yerk: What’s your target for the DAX then?
That beast is already up 2% today.
Strange. This is supposed to be a crap rally. But it seems to never stop. Small moves down, huge moves up.
FTSE (future) is on it’s fifth attempt to break 4500 level (since early May). It’s been as high as 4508 so far this morning and has only pulled back a bit. Looking pretty bullish at the moment.
@Dressguard: ~5250, second line of defense is ~5350 (eg spx 1k)
Today we have a ladder chart… step by step
What kind of deal has TT closed with the Chinese last week? One more surprise buying?