This morning I spent some time looking at charts, and once again I could see how limited and probabilistic - and often misleading - is the predictive power of chart formations.
It looks like something important happened to the SPX in the Summer of 1998 - it was the end of a wave which preceded the last one, up to the 2000 highs. (As I recall, the AD line for SP topped in the spring of 1998). It also looks like the final wave was an Ending Diagonal with a failed 5th which topped on September 1, 2000 -- which, in this case, may probably be considered the orthodox top of the great Bull market in SPX.
The decline towards the 2002 lows was volatile and choppy. The volatility near the bottom is a good illustration of the limitations of TA - in this case, EW. Look at the declines into the July and October lows of 2002 (and then, March 2003) - they all look impulsive - and yet, they led to the advance of the last few years. Could it be that March of 2003 was actually the orthodox low of the Bear market - rather then the 2002 lows?
At this time my best guess is that the advance up to the recent highs was a series of "threes" - not entirely unlike the picture in this post, but upside down.
Message 22474069
The implication, of course, would be rather bearish for the next few months. We would be facing the Wave "C" - an impulse down. Trading it may not be easy. Just imagine what fun it would be if that "C" takes the form of a large choppy Ending Diagonal? -g/ng
After that putative "C" is completed, could the entire formation since the 2000 top be an "ABC" - which perhaps would be only the [A] of a much larger structure? I think this is possible. Mr. Market has all the time in the world.
....But we do not. Have a great holiday weekend, everyone... ;) |
