If you been following our technical chart segment you have seen the evolution of one particular chart: That of the daily $SPX. The rejection of price on Friday, after yet another push higher, occurred at the level of an arch that we have been observing unfold over the past year. Now there is no technical pattern called the “arch”, but one cannot deny that since September 2014 price rejections have taken place along very specific points that now offer stunning symmetry.
It is not only the arch here which has proved superbly precise, but the confluences of price rejections are incredible.
September 2014: 2019.25 September 2015: 2020.32
December 2014: 2093.55 October 2015: 2094.32:
One can’t help but wonder if all of January – July 2015 was simply the building of a giant head.
Consider also that the MACD is at its most extended since the year 2000 top and the RSI actually made a lower high versus the December 2014 2093.55 peak. Also of note is that the $SPX is the furthest disconnected from its 50MA to the upside in years.
Taking these facts into consideration, especially in context of the weekly and monthly charts we’ve been highlighting, the potential for a giant heads and shoulders pattern remains fully in play.
What will break the pattern? Likely a decisive and confirmed close above 2094 on a weekly basis and/or new highs.
What will confirm the pattern? New lows and a break of the lower neckline.
The target? Depending on how you define the neckline (were it to break) it invites a visit back to 2007 highs. Yes the pattern is indeed this large:
That would be a drop of over 25%. A very steep correction into 2016 and something that central banks are clearly desperate to avoid. Central banks, as academia, know the truth:
“It is unclear whether the sell-off is over or has slightly paused; in the latter case we could be headed for a potentially very serious equity slump by historic standards,” economists Adam Slater and Melanie Rama said in their report. “A sharp correction in global equity prices would pose a significant threat to the global economy. By reducing wealth, Oxford’s economic models suggest a 15 percent drop in the MSCI could cut the level of world gross domestic product by as much as 0.7 percent after two years. A 30 percent shock would knock off as much as 1.5 percent.”
Central banks can’t afford a big correction to take place as it goes counter to their mandate, a stable growing economy, hence they interfere every single time a correction of size is about to unfold. And any threat to the global economy must be prevented. So it’s no accident that we have seen all price expansion since $SPX 2020 in October come on the heels of Mario Draghi hinting at additional QE coming in December and the PBOC cutting rates just a day later. Now that fiscal year end mark-ups are over for many funds buyers have to prove how committed they are to driving markets higher.
Price will ultimately confirm how this will play out, but altogether this $SPX chart is an amazing construct of symmetry and, as a fan of structures and symmetry, it certainly has my attention. I can’t recall ever seeing such a precise structure.
Categories: Market Analysis
I was looking back at your old post from October 15 when you highlighted that so many rallies in 2015 coincided with options expiry. So I ask…is it just coincidence that the vertical drop in August began on Tuesday the 18th and options expired that Friday the 21st? In those four days, the $SPX dropped 6.5%. We all gave so much attention to the drama two days later on Monday August 24th, but over half the damage was already done by then. Of course, there were also runs up to expiry on September 18 and October 16. It makes you wonder if the next big leg down will come just in time for expiry on November 20th or December 18th.
Seems with the breakout above 2100 today that symmetry is broken?
I’m watching for weekly close confirmation
So….now that the SPX has closed above the 2094 “right shoulder” of this possible drop scenario, should it be be thrown out the window?
I’m waiting for weekly close to confirm one way or the other.
It looks like you are right with the 2094 call
VERY interesting this Monday morning (11/9) with the SPX at 2082. Mr. Northmantrader: Is THIS the beginning of the fall (or more chicanery within the 2040 2135 range)?
It looks like Northman called the top at 2094
Going to stockcharts.com, pulling up a chart of SPX over a 2-year span, and annotating the chart with a single application of the “fibonacci arc” tool,
produces a half-circular arc nearly identical to Northmantrader’s own “arch”, in that it connects points starting in mid-Septemper of 2014, and moving all the way up to now, November of 2015,
but also includes “retracement arcs” that seem to account for various bounces in price, under specific areas of the top arc.
I would include my own screen-shots, but there is no option for that.
Did you find the awaited confirmation on Friday, November 6, 2015 closing at 2099?