So, I started looking for reversal patterns. As you know I've been super bullish (laid out my bullish TA argument here It's Not Rocket Science, It's technical Analysis.) and I still feel that way but there's a flip side to every coin and I did come across something that was concerning. It's called a X-Sequential X7 Pattern and it's great for spotting momentum reversals.
It was developed by a German tech analyst named Devin Sage. I like it because it works and not too many people are using it so it's not over used to the point it loses it's potency. All that's needed to spot the pattern are three swing highs with the one in the middle lower than the other two. You draw a base line from the first high to the third high. You also need 7 swings and you mark those swings 1x7, 2x7, 3x7, and so on. Here's what it looks like on the bearish reversal:
The way you forecast a price target using this pattern is tricky but if you sign up for my service I'll explain every pattern and forecast until your heart is content. But here, to make a long story short it's measured moved. For anyone familiar with measured moves this picture will give you some idea:
This brings us to the $SPX. The current up trend in the $SPX fits the build of this pattern and as you can see it's not easy to fit the build of this pattern so that in of it'self says something. Here's what the daily chart looks like with the swings and base lines pointed out:
Like all technical analysis this pattern doesn't necessarily have to pan out the way it usually does, but when it does it's a doosie. If price breaks the baseline traders I will let you know! The stop will be the 7x7 high. But first we need price to breakdown before we can say what the 7x7 high is, and measure a move for a target zone. You best believe I'll post here the targets stops and everything if price breaks. I'll have to give it to the premium subs first but i''l post it here some time after.
I don't think with QE3, BOJ, ECB, and a better looking housing market that the market will turn over but the market doesn't care what I "think!" This is where technical analysis comes in traders and where what we think goes out. to read more about Devin Sage check out his site Here: http://www.technische-x-analyse.de/portal/content/index.asp it's in German so you'll need to translate it with Google translate or whatever but he's a beast with it and well worth checking out.
Good luck and happy hunting traders and I'll talk to you guys later!