Wednesday, May 15, 2013

Charts 05-15: Channel improvement

The pop today actually fixed the channel I had going.  It's nearly perfect now.  Looking for a touch of the lower trendline for a long entry -- most likely May 31 SPY calls.

Did you see Daneric's post tonight?  He's got the basic chart I posted last night, with a lot more discussion and details.  Neat.

SPX 05-15

This would have us topping into the close May 28 or 29.  May 30 has the next GDP number release.  I can imagine that could cause a stir.  Negative print?

6 comments:

Bryan Franco said...

Christian - This comment is just an attempt to marry some element of my work with yours. Is there any way you could depict a 3% + correction happening (preferably a 5% +) before the ultimate top as one of your scenarios? I just mention because a major top (one that resulted in a 20% + correction) has never happened without more "chop" as implied above.
Bryan

Christian Gustafson said...

Hmm, will give it some thought tonight. The initial drops from a top could also retrace deeply, as in 2007.

Right now I'm scratching my head re whether we will make it to 1672 SPX tomorrow. That would be the full 1.618x extension of wave 3 here and touch the top of the channel.

Amazing tape.

Bryan Franco said...

Thank you Christian. My work would require a new high after said 3% + "correction" based on every 20% + selloff that i looked at in the S&P back to 1927 (and Dow between 1896-1927) using closing prices. I am not sure if a retrace can result in a new high by your work. Basically, we have 5% + correction followed by back-to-back 3-5% corrections using closing prices. This current series ( 5%+, 3-5%, 3-5%) never resulted in a 20% + correction in the history of the market. The best pattern is (3-5%, 3-5%, 3-5%, new high, 20%+ drop). There are also many instances where we had (3-5%, 3-5%, 5%+, new high, 20%+ drop)

Bryan Franco said...

If you would like, I can share the Excel spreadsheet which I created manually and you can spot-check the data. Do you have a way to share data on your site?

Jeff Schrader said...

Bryan, historically in what time frame do these smaller series of corrections occur prior to a drop of 20%?

Bryan Franco said...

Jeff- You bring up an excellent point. The "spacing" seems to matter. Looking at the data, the big tops tend to have a series of 3-5% and 5%+ declines spaced about 1-2 months apart followed by a final rally that lasts 1-4 months. The current tape doesn't reflect that just yet. Using closing prices, the selloff in Feb of this year didn't breach 3%. If it did, the pattern would be great. Instead we have a spacing of about 4 months between the Dec' and Apr' mini dip - this doesn't appear to "cut it". What would be great is if we have 2 more 3%+ selloffs in quick succession. The implication of all this is that there are new highs after each of the selloffs. This suggests a final top is months away!