My favorite chart pattern is the Ending Diagonal (5 wave wedge) and it’s coming together on the weekly chart for the SPX-S&P 500.
My 2013 forecast indicated that the stock markets were going to make investors go crazy wondering what to do in a consolidation and then move higher on the February/March pivot point. That was then this is now. An ending diagonal is just that, an ending pattern. There are times where the pattern doesn’t follow through but in more cases than not it does.
- The 5 wave wedge is at the top of the descending long term channel, more ammunition for the pattern.
- Declining volume (not shown in the chart) is another tell tale sign.
- divergence in momentum between your favorite indicator and the price of the asset.
- When the pattern is done, at it’s peak, emotions are running wild. Happy days are here again at a top, mass suicide at the bottom.
My model indicates pivot points in time, when the patterns are there to back it up, it pays to be attentive. There is the possibility of the market moving beyond the channel (minimal) but at this point it’s not looking that way.
So therefore instead of the stock markets moving up from March to September, throw that out the window for now unless things change between now and March…DON’T SCREW WITH THE PATTERNS…
Pivot Points for 2013 on the weekly model:
- February 19
- April 22
- August 26
- October 28
The grand daddy February 24th 2014…not sure how this one is going to fit in to the mix, top, bottom, breakout or break down.
I myself, as of January 4th….hold only cash in the account for a short term trade here and there. I’m not saying that’s what you should do, this blog is about YOU thinking for yourself.
One other thing I’m going to do is I’m going to sit back and read Jesse Livermore’s “Reminiscences of a Stock Operator”, William O’Neil’s “How to Make Money in Stocks” and “Technical Analysis of Stock Market Trends” Edwards and Magee… again. Your probably thinking why? well I’ve read these books countless times and it pays to review them when business is about to become slow.
I really enjoy Jesse Livermore’s “Reminiscences of a Stock Operator” the book brings me back to the time of the early twentieth century and reminds me that today isn’t any different for trading than it was then, no matter how much the squawk box says it’s different today. I sit back and put myself in Jesse Livermore’s shoes to see what he would be doing now if he were alive.
So that’s what I’m going to do… I’m going to get comfortable in front of the fireplace, pour a glass of scotch, enjoy a cigar and read Reminiscences of a Stock Operator.
What you do is up to you…For me the Ending Diagonal-5 Wave Wedge tells me that a change of trend is coming, in this case, a top.