I’m intrigued by the recent congestion in S&P 500 prices. Up and down it goes. Here’s a chart of the past 6 months-ish:
Unlike the relative smoothness of trends in the past, we’re now in an undecided market. According to (very) traditional technical analysis, I reckon this could be a sign of multiple chart patterns:
- Head and shoulders top: see here. The recent run-up might negate, but still seems to signal further downward move.
- Double top: here. Is 2060 on /ES the top, and we’re on our way back down? Or maybe we need another run to 2080 to verify the old top, before heading back down?
- Triple top: here. Maybe we can say the runs to 2060 are just 2 more tops added to the 2080? In which case reversal time?
- Falling wedge: here. Perhaps we’re seeing the high/low runs compressing in a falling wedge, indicating a possible upside breakout?
So many people sign up to newsletters (some of which are very exclusive (read: expensive)) which purport to have amazing chart pattern analysis. Others buy expensive chart pattern software. I’m clearly a dunce, as I can’t figure out whether one pattern is better than another in the case of the S&P today. Assuming complete ignorance, I could equally weight the above observations and come out on the side of a continued fall in S&P prices. I place roughly 50% confidence in my assertion – so less than the weather forecasters who predicted at least 2 feet of snow in NYC yesterday.
In sum: back to the drawing board. Not literally – probably won’t use hand-drawn lines to guide my trading anytime soon.