Friday, August 7, 2015

1-2 month Triangle still in play?

Dow continues to break pivot lows but SPX has not broken below its 2063 pivot. Here are the 3 SPX triangle possibilities I see:
1. 2-month Bullish Wave 4 Triangle: 2135-->2044-->2133-->2064-->2114-->2070ish
This would be followed by a retest of 2135, probably a new high and possibly a breakout near 2200 or of course a failed breakout.

2. 1-month Bearish Wave B/X Triangle: 2044-->2133-->2064-->2114-->2070ish-->2085-2105
This would be followed by a retest of 2044, probably a new low and possibly a breakdown to my favored Fib/measured target range of 1922-1951.

3. Expanded Triangle: There is a bearish and bullish version of this that is still alive as long as 2044 and 2133 are not broken. This seems highly doubtful because the triangle leg timings would not be proportional and we've already had a record narrow price-time consolidation.

I lean 70/30 to bearish #2. However, both #1 and #2 call for a bounce short-term as favored also by the put/call, TRIN and 200SMA. Dow looks like it has (nearly) completed a 2.5 month wedge of some sort (EDT/LDT?) or perhaps a series of 1-2 waves. If the latter is true or an LDT is in play, that would fit well with bearish SPX scenario #2. A double zig-zag wedge or EDT Dow pattern would be conducive to SPX scenario #1. Perhaps Mr. Market would like to fool as many participants as possible in which case it might (1) have the Dow rally above 17784 thereby eliminating the most bearish 1-2-1-2-1-2 scenario, (2) retest key moving averages near 17800 or even the pivot above at 18100 which the LDT scenario would still support and then (3) begin a rapid descent to 16000ish. A Dow rally back to 17800-18100 would be a 3-4% rally approximately equating to SPX 2130-2150. So, of course things could breakdown at any moment especially now that we are not seeing BOW days, but bears probably have to deal with one more rally. If so, the question is will it exceed 17800 or not. I have been reducing short positions today and will probably re-enter short as SPX rallies back near 2090-2110. Good fortune.

No comments:

Post a Comment