Wedge Baby All Growed Up
On Friday night’s episode of Mad Money, Jim Cramer stated that he did not believe in technical chart analysis. Today, here on my blog, Doug Kass commented that technical analysis is not his approach. Fine. But why don’t we take a look at a little example that has made me an absurdly huge return this month?
(Sorry for the crappy charts below, but it is late at night and it would take a long time to fix them.)
On May 6th, I posted my first chart of the “rising wedge” pattern that I spotted forming on the SPY chart:
On May 23rd, I posted an update with the chart below (click to enlarge) where I accurately predicted the S&P 500 would drop another 50 points to 1325. (I was off by 6 points as the S&P hit 1331.29 on June 12th):
On June 1st, Barron’s published a me-too piece on the rising wedge.
And here is a chart of my baby today, the bearish rising wedge pattern, all grown up:
This is a pure textbook example of a pattern that has been repeating for a hundred years on Wall Street, and probably since humans began trading stocks hundreds of years ago. I am all for fundamental traders ignoring technical analysis. After all, it is their unconscious thought patterns that create these beautiful chart patterns for me to exploit.
(I bet the farm double-short based on this technical analysis and cleaned-up.)
June 16th, 2008 at 7:37 am
Hi Matt,
I have the impression that the bollocks rally is finally over. LEH announced their losses, stock rallied and pulled back. European market also showed weakness after being relatively strong. Your subtitle “The S&P 500 Bear-Market Rally is Over. Look out below!” is now right on the spot.
June 16th, 2008 at 9:00 am
Hi Dressguard,
Well, I think we have to take out the March lows first. Also, it is expiration week, so anything can happen - especially now that iBanks can borrow billions from the Fed and gamble it in the market.
Matt