Market Analysis

Mystery Chart

Whether we’d like to admit it or not we all have biases on some level or another. The hardest task for traders is to be unbiased especially in times of high emotion and sentiment extremes.

I think it’s fair to say that following the January optimism extremes we’ve now reached a pessimism extreme in markets. In this context then I’d like to present a mystery chart. I’ll keep its identity hidden until Sunday’s weekly market update, not because I want to be cheeky about it, but because I’d like everyone to really ponder this chart. Why? Because of what this chart represents. Now I know it’s not fair to hint at its significance without revealing what it is, but that’s why I’ll talk about it on Sunday.

Of course you are free to guess what the chart is 🙂

Without further ado here’s the chart:

Is this chart bullish or bearish?

I have a take on it, but then I know what the chart represents.

But while you assess the chart I’ll outline several factual technical observations that are unbiased:

The price action since the 2009 lows is engaged in a very large rising wedge. In 2007 the bull trend ended when its steeper wedge broke to the downside following new highs on a negative monthly divergence.

As of this writing the 2009 trend is intact. It has not broken, but is at risk of breaking. The monthly negative RSI divergence did not come on new highs, rather it came on lower highs, so technically it’s not a negative divergence.

The previous trend line tag was established during the 2016 lows. At that time this chart showed a large bullish descending wedge that produced new highs with a run toward the upper trend line that was slightly exceeded during the January 2018 highs.

The lower highs and the lower lows since in 2018 are forming a potential bull flag. This bull flag is unconfirmed.

Is this chart bullish or bearish? What’s your assessment? Can you guess what this chart is?

More this weekend.

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Categories: Market Analysis

9 replies »

  1. Short term, it’s bullish. The pattern indicates another high ahead. Longer term that riskng wedge will end in a break lower.

    Bottom line: most likely scenario: A higher high ahead for a top


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