Monday, June 14, 2010

Modeling the rally, part 2

The Three Possibilities:

Here you see the small rally channel mapped out in the previous post, and extended to where they intersect the main trendline(s) generated from the entire previous rally (March 2009 Bottom to the April 2010 Top). The arrows point to the point in time and price where the upper channel line shown in the previous post intersects these bigger scale trendlines...

Since major exponential trendlines are often exceeded by about 1 to 1.5 % before they cause a reversal, multiplying the figure shown on the charts above by 1.015 and then matching the new 'updated' prices based on the charts above to the calculated results of the upper channel shown in the last post, that finally gives these slightly revised price points and dates:

Slightly revised three possibilities (models) based on the above exponential chart price trendline intersections increased by 1.5%:

1.272 Basis, 6/18 or 6/21 at 1135.18

1.317 Basis, 6/22 or 6/23 at 1148.37

1.382 Basis, 6/14 at 1108.6

It would be easy to argue that the last one has already happened (today) and is a good match for reality. Todays candlestick looks like an important top, I should just accept it and go short, that would seem reasonable. I think collision with the 1.382 trendline did cause this reversal, but the game's not over yet. Since we're barely at the .200 node value (closer to the .500 node is the normal termination of a directional move), and I suspect this rally from 6/8/10 is, or should be, a typical A-B-C pattern, I believe we saw 'A' end today, then a drop will continue tomorrow which will be wave 'B', and then the 'C' wave will carry up to a target somewhere from the dates 6/18 to 6/23. I favor the longer target both because the 1148.37 price target gives a good right shoulder symmetry to the $SPX and because the trendlines on the middle 1.317 chart above, fits the three latest bottoms in the best way of the three models shown, and goodness of fit is how you try to evaluate your models...

One more point of note, there are 31 trading days from 4/26/10 to 6/8/10. If you extend out in time by a Fibonacci 38.2%, it puts you to the date 6/23/10....

Of course the market can ignore all of this and just tell me to go to hell, and then none of it aligns after today....

1 comment:

Anonymous said...

really nice work Mark,

FWIW, trying the SPX short side again at 12:16 pm. Based on what I got from your treatise, I'll have a chance to exit if it doesn't play through.