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Jason Haver: Did the Stock Market Just Tip Its Hand?


A clear near-term pattern may have emerged.

Lately the market has done its best to convince traders that there are probably easier ways to earn money, such as by selling a kidney or by stealing the "Mona Lisa." Over the last couple of weeks, I haven't done much in the way of near-term projections, because I felt the market was near-term "un-projectable." I have no regrets in that regard -- sometimes the best trades are the ones you don't take, and recognizing in advance when a market should be avoided can be valuable.
Today, though, we'll consider the possibility that something recognizable may be emerging from this mess, and we'll examine a potential near-term pattern (and variations thereof). So, without further ado (adieu?), let's get right to the charts.
The first chart is the S&P 500 (INDEXSP:.INX), which hints at a potential triangle in formation. This also fits the recent whipsaw nature of the tape -- for comparison, the last triangle we encountered was in March.
Click to enlarge

Stepping out to the long-term view, we can see that if there's a near-term breakout, then SPX will encounter long-term resistance soon thereafter:

Click to enlarge
The NYSE Composite (INDEXNYSEGIS:NYA) is in a similar position to SPX (via a slightly different pattern) and has already completed enough rally waves to be complete:

Click to enlarge
In conclusion, the market still hasn't laid its cards on the table, but it may be tipping its hand just a little bit here. Keep in mind that if this is indeed a triangle, then it would mean that any breakouts will whipsaw in fairly short order, since triangles virtually always form as the penultimate wave. Either way, bears still have a good shot at gaining traction over the intermediate term, so keep in mind that all near-term bullish bets are off below 1859 SPX. Trade safe.

Follow me on Twitter while I try to figure out exactly how to make practical use of it: @PretzelLogic.

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No positions in stocks mentioned.
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