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One of the most tradable patterns during the past two years has been the
terminal wedge coupled with the 162% retracement of a decline. I've
mentioned these a number of times in the past on weekly, daily, and hourly
charts. A rising wedge is a pattern where prices are bounded by a pair of
rising trendlines which meet. A pair of terminal wedges showed up quite
nicely on the attached hourly chart of the SP emini. The longer wedge is
defined by the blue lines and the shorter wedge is defined by the red lines.
There is also a blue line marking a very short term rising trend. A
confluence of resistance including the 162% retracement of the last decline
appears in the 1295-96 range and was the ideal place to finish loading up on
shorts if you are bearish.
On a fundamental basis, it has been interesting to watch the market rally on
the expectation of a halt in Fed increases even as the expectations were
based on a slowing economy which is hardly bullish for stocks. This was made
for a contrarian trade. We will see how the market closes in a few hours,
however this appears to be shaping up as a bearish outside reversal day. I
would not be surprised if today's spike upward was the last hurrah!
Earl
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Attachment:
Terminal wedges show up again.gif
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