Wednesday, August 10, 2011

Technical Aspects of Market Failure

This is my analysis of what's happened so far in the current market decline.  The key was breaking the Neckline of this head and shoulder pattern at around 1260 on the S&P futures chart depicted here.  Classical failure of a neckline in these circumstances is for the decline to equal the distance from the Head to the Neckline.  That is about 125 points so one can subtract that from the point which the price broke the neckline for some idea of where a bottom my form.  That is around 1125 for the Mini futures.  Many times this marks the end of a trend. We have been in an up trend since early 2009 and had a similar market hiccup almost exactly 1 year ago.  The only difference technically is this one formed a clear H&S pattern.  Could this be the beginning of a trend change?  Very possibly this is the case.  Only time will tell,  However should this market manage to go up and penetrate that extended neckline now residing around 1265 it will have over come the failure and likely go on to make new highs.  Watching support, new resistance, volume and money flow will provide indications going forward.  Should be a very interesting Fall.

Click on chart to enlarge

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