Are We Still Repeating the February 2010 Pattern?

Jun 21, 2010: 11:02 AM CST

I assumed this scenario was decreasing in terms of probable outcomes but this morning’s upside gap and EMA break – so far – puts the “February Pattern” back on the table.

I first asked this question on May 26th in the post “Will February SP500 Pattern Repeat and Show the Future?”  Reference that post before reading this one, as this post is an update of that discussion on eerie similarities.

Let’s see the update:

Here is part of the text from the May 26th post… which still holds true:

Let’s start with the January/February “ABC” Pattern:

1.  Breakdown of 20 then 50 day EMA with strong sell bars
2.  Rally into the Crossover of the 20/50 EMA – “Cradle” Trade at 1,100
3.  Sell-off as expected to New Lows with a Positive Momentum Divergence
4.  Strong Hammer/Lower Shadow Candle off the low (dip under 1,050)

After that, the market rallied, breaking back above the 20/50 EMAs… and on to new highs.

Let’s compare that with the April/May “ABC” Pattern so far:

1.  Breakdown of 20 then 50 day EMA with strong sell bars
2.  Rally into the Crossover of the 20/50 EMA – “Cradle” Trade at 1,170
3.  Sell-off as expected to New Lows with a Positive Momentum Divergence
4.  Strong Hammer/Lower Shadow Candle off the low (dip under 1,040)

I can now add a #5 to both lists:

5.  Break above the 20 then 50 day EMA

After which the market pulled back slightly and then gunned it to new highs.

The green arrows on the chart reflect the current development – a bullish break above the key 1,120 area and 50 day EMA.

The one slight difference in the patterns is that the market fell to test the 1,040 level again in June for a potential double bottom pattern, while in February, the market was content to hold support with a simple “ABC” three-wave structure.

The other difference, as some of you noted in the comments, was that the market this time broke under its rising 200 day moving average.  We’re back above that average now.

If the market holds above the 1,120 level, then look for a potential continuation of the February pattern that will take us to 1,150, 1,170, and potentially even 1,220… but we’ll update those develpments as they occur.

Keep up with more details and daily commentary in our evening daily analysis reports.

Corey Rosenbloom, CMT
Afraid to Trade.com

Follow Corey on Twitter:  http://twitter.com/afraidtotrade

8 Comments

8 Responses to “Are We Still Repeating the February 2010 Pattern?”

  1. terlyn Says:

    Trading around resistance/support lines is hazardous!

  2. Wwfawell Says:

    This is exactly what we are doing…. and building a right shoulder to the forming head and shoulders formation. These have been very technical trading markets for quite some time and I don't see any good reason why it should stop.

  3. Adrian Reutersward Says:

    check out the similarities with EEM

  4. Pharlap Says:

    I look at the travertine in my shower and see faces , animals etc. Patterns are everywhere based on nothing more than the mind playing tricks. Go ahead , bet your vacation on them.

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  6. Michael Arold Says:

    Interesting. I outlined a similar scenario last week. http://wp.me/pCTzl-9w

  7. Ajay Says:

    hi cory,

    thanks for the a-b-c pattern with momentum diergence explanation. If your time permit can u show the examples of linda 3-10 oscillator abc in uptrend, xyz in down trend patterns. How to interpret that.

    Thanks

    Ajay

  8. Top clicks this week on Abnormal Returns Abnormal Returns Says:

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