Wednesday, February 26, 2014

SPX Triangle

I was looking at this yesterday and today when the USD/JPY tested lower again, this time not immediately pre-market, but just on the open, I really started to wonder and by this time U'm sure I'm not the only one who sees the SPX/SPY triangle right on the resistance area and right before Yellen's testimony tomorrow.

Big moves usually have big head fakes before them, for example...
 The set up for the Feb 6/7th rally started back on Jan.27th at "A" with a range that was under accumulation, we predicted the break below that range in advance as a head fake set up because the range was so clear, all of the orders and stops would be right below at "B" and then we saw even more accumulation confirming a head fake/bear trap at "C" when a small "W" base was complete , the next day our short squeeze began, this was a strong rally up as had been predicted in detail Feb 4th, but even before it began we expected it to see distribution which it has and lead to an even larger move down to the first stop at the SPX 200-day s.m.a., so is this triangle of the last 3 days with strange USD/JPY moves right at the open that are  helping to form it just coincidence as it sits right at a level where a head fake breakout would cause retail to buy just like the last head fake breakdown caused them to short and create a bull trap this time whereas last time it created a bear trap?

All I know is the sym triangle is the most recognizable of the consolidation/continuation patterns, traders will buy it on a breakout above the triangles resistance, thus creating a bull trap , I don't think it could possibly be anything else with this in the way...

 This is a worse leading negative divegrence than the previous one that was quite volatile with 2+% days down and the increased volatility was apparent on the rally up out of the bear trap/short squeeze.

A pop out of a triangle would be a very obvious technical setup, in fact if someone were to go to Stocktwits right now and checkout the SPY stream, I'm sure they'd be talking about the triangle.

Otherwise the reversal process as they are typically tighter on the bottom and broader on the top looks fairly mature. It;'s interesting this triangle would pop up just before Yellens first Congressional testimony when the market is looking for guidance on the first rate hike which was already hinted at to be mid-2014, about a full year ahead of expectations.

I don't think this is a coincidence, I also don't think it is what technical traders assume it to be, it never is. If anything, if it is a real triangle put there purposefully, I'd say 90% it's a bull trap.




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