You know I’m a big fan of studying price patterns and looking for those patterns to repeat, and it appears that we have a near-identical repetition – on a smaller scale – of the move down and rally from the February low, which has played out over the last few trading days.

Let’s see them and compare.

First, the Daily S&P 500 (SPY ETF) Chart showing the Feb. 2010 low and recovery:

The most important features to note are the three-wave swing (“ABC” – A down to $107, B up to $110.50, C down to $105) which formed a positive momentum divergence on the low.

Price then shot straight up through the 20 and 50 EMA (which was in a bearish posture) then continued up – in “Popped Stops” mode – to challenge then exceed the key swing high at $115.00 (1,150 in the S&P 500 Index).

Is that pattern setting up again?

Next, the most recent price action on the intraday charts:

Price followed the ’script’ perfectly, breaking down, forming the same “ABC” three-wave move into the April 19th low at noon, then – almost as if on cue – shattered back above the averages this morning with the gap.

Since then, we’ve had a sustained rally (pausing slightly in the afternoon session).

If bulls can keep driving price higher beyond today’s swing high at $121.00, then we could be in store for a continuation run to the $121.50 area and beyond – in exact pattern repetition.

If not, then the market followed the script but deviated at the end – which still is interesting.

These sort of posts help underscore the importance of finding market “character” or behavior, and help make sense of seemingly random moves.

Corey Rosenbloom, CMT
Afraid to Trade.com

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