Our charts have grown fairly “busy” lately, what with harmonic patterns, chart patterns, fan lines, channels, etc. I find it helpful every now and then to take a step back and examine those elements that have had the biggest impact in recent years — and are likely to continue doing so.
In my opinion, the two patterns that have influenced prices more than any other are Fibonacci levels (primarily related to the 1576-666 decline) and fan lines.
Note how strongly prices reacted to each of the Fib lines off the Mar 09 lows. Every Fib level played an important role in providing support and/or resistance at pivotal points. The .236 didn’t slow the advance much, but it provided much needed support after a 9% decline. A tag of the .618 touched off a 17% correction (caught by the .382) and set the stage for the Gartley pattern completion at the .786 a year later.
Fan lines off the Oct 2007 highs have likewise influenced prices at some key moments. The first line halted declines in Feb 2010, as well as the afore-mentioned 17% correction. The second fan line caught a falling market in Nov 2010, Aug 2011 and Oct 2011. The third is in play right now, but for the moment seems to have stopped the bleeding.
There are fan lines at work from the Mar 2009 bottom, too. In fact, combining lines from the top and the bottom, we get pretty good guidance as to the market’s current trajectory.
Adding in Fibonacci time ratios offers additional perspective. Though there are several ways to lay these out, but here’s one arrangement that makes a lot of sense to me. It points to 1472 in the middle of July — my top forecast at the moment.
And, at the risk of violating the whole point of this exercise, the chart below incorporates channels drawn on the weekly RSI. As dark as the global financial picture currently looks, the chart makes a pretty argument for the analog I originally posted back on April 9 [see: New Analog I’m Watching.]
As of last week, that April 9 forecast was off by two days. Unless this market takes off pretty quickly, the timing could be off by even more. But, the price direction and general timing looks like it supports my target of 1472 by early-mid July (OPEX, anyone?)
For the analog to hold precisely, we’d hit 1472 toward the first of the month, settle back a bit, then make a lower high around the 15th. I’m not picky.
But, for any of this to matter, the euro bunch must figure out (and soon!) a way to stay open for business just a little longer — no small task. I wish I could say I feel safe in forecasting a spike in prices just now. I don’t. But, that’s what our charts are saying. And, they haven’t steered us wrong yet.
Stay tuned.
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Something is wrong with Disqus. Can’t seem to add charts to or edit my own posts. Maybe some of you have had the same problem and were too polite to mention? I’ll work on getting it straightened out. In the meantime, here are the charts for the answer posted to kgmoney’s question….
Comments
9 responses to “SPX: The View from 30,000 Feet”
Hey partner…
Thanks for another great perspective. Wow… that call for 1472 sure seems courageous especially in light of the negative market mood out there right now. But the way you’ve drawn it in the chart above just has such a nice balanced look to it that there’s no way I would discount it as a very real possibility. And it’s entirely possible that a month from now I’ll be thanking you again for snapping me out of my bear-funk.
Right now I’m pretty hung up on this H&S pattern in the Russell and I’d just love to see it complete. If it were to accomplish that it could do it pretty darned quickly. But I’ve also suggested that since the first two wave down were almost the same length, the next move lower could be an extended fifth. That could take quite a while to accomplish ‘if‘ the extended fifth were to happen. But if instead, the market were to put in one more low, just to ‘finish off the current move to my satisfaction’, and stall there… then I’d sure be suspicious that you’re vision might be on the verge of playing out right away. And man would that be a nice wave to catch.
I’m certainly not suggesting I know what’s going to happen Pebble, I’m trying to fit my vision into your time frame to see if it’s possible to accomplish some sort of ‘hybrid’ of both my vision and yours in the time allotted… mid July. Might as well make it July 12th which is my b’day. Julius Caesar’s too, mind you we were born in different years. Also, I just can’t shake the fact that for the past 3 years running, the end of June has marked a very important turning point in the markets. A low in 2009, another low in 2010 and a peak in 2011 all occurred around July 1st-4th. I don’t see any reason we shouldn’t expect that it might happen again this year. Maybe it has something to do with kicking off a new “attitude” somewhere around the 4th of July? Actually the important inflection point of the past 3 years was closer to the 1st of July, which is Canada’s birthday (as if that mattered to anyone, lol). Be that as it may, if the end of June is to mark an important turning point this year as well, who knows if it would be a peak or a bottom?
Whatever it is going to be, I’d suspect that within one week from now we’re likely going to have a much clearer picture about the possibilities. Thanks again for your perspectives PW. Hope everything is going well on your end.
Hello my friend,
Thanks for checking in. Sorry I’m just now getting back to you. This market has me working overtime – nothing very simple at the moment.
Such a fine line between courageous and foolhardy, guess we’ll find out which soon enough. Timing is the one area I’m least sure about, but working on getting more confident.
I owe you a longer response and a visit to your blog.
Hopefully things will calm down a bit, but have to get some sleep…
Cheers
for pebblewriter readers – check out Albertarocks’ great blog:
http://albertarocks-ta-discussions.blogspot.com/
Working fine at the moment Pebble.
That bold call of 1472 is just crazy enough to work. Thanks for all your hard work and great charts. I guess some lottery ticket calls will be on the shopping list in the near future.
Nice post Pebble thanks man. How did you decide that July 9, 2011 was the 100% mark for your fib time levels? I don’t remember seeing you use those before and they are interesting, but just curious how you set the baseline for the 100% level.
You’re very welcome. Hopefully we’ll get the reversal and the thanks will be deserved, LOL. There are lots of ways to slap the time fibs on there; not as clear cut as for price. This is just one that seems to fit the key highs and lows pretty well — and that break in July was obviously pretty key. I’ll try to post some alternatives later tonight or tomorrow.
could you share what your settings are for your fan lines…I can’t seem to match them :S
thanks
Great question, kg. For those who don’t know, fan lines can be driven
by Fibonacci ratios. But, I also construct my own fan lines that
connect important highs and lows with key reversals. In fact, I often
start with my own lines and then try to overlay the Fib generated ones,
just as a BS detector.
Something is wrong with Disqus, so I’m posting the charts with this answer up above.
The first chart above shows the lines off the Mar 09 low overlapped by
Fib generated lines (purple.) The first line (0%) is the steepest and
runs through Jan 2010. The 2nd chart shows the lines off the Oct 07
high. The 0% line is the one that runs to the oval.
interesting, thanks
very nicely laid out…I was hoping for a big picture update!