Is the SPY Repeating the Exact Same Pattern from Yesterday?

Mar 3, 2010: 1:02 PM CST

That’s a question I’ve been highlighting frequently, with the type of day structure repeating, almost forming a script.

What’s interesting is that – as of 1:00 EST – I can highlight the direct comparisons so far in today’s trading that are identical in everything but price to yesterday’s morning action.

There’s no guarantee that the market will continue following the script, but if it does, why not try to take advantage of it, as if the pathway forward for price was made clear.

Let’s at least see the pattern.


(Click for full-size image)

Follow along from yesterday’s opening gap action to the flat/down correction that took price back to the rising 20 EMA.

Then notice the new price high on the session that formed on negative TICK and Momentum Divergences at the upper Bollinger Band, which were non-confirmations of the recent high, setting up a retracement swing to the downside.

That downside retracement swing came into the support of the 50 EMA, and price rallied one more time to a new high before collapsing into the close.

Let’s extrapolate that to today’s action so far.

Same gap (but smaller), same correction back to the 20 EMA, same rally to new highs on another dual negative divergence at the upper Bollinger Band,  same pullback to the 50 EMA…

and now it’s up to the market to repeat the script, or continue declining, slicing through the 50 as was the case at the end of the day prior to the sell-off.

This type of analysis is unique, and it’s along the lines of “Character Analysis” or Structural Analysis (type of day structure) of price action (instead of relying only on indicators).

The goal is to interpret the story price is telling, and if you see a direct repeat of action, consider studying to see whether the future action closely resembles the prior action (giving you very simple trade entries and exits) or if the market deviates from the script.

These are the type of concepts I discuss and teach in each night’s “Idealized Trades” reports, which teach you how to interpret price action and structure and the natural set-ups and trades that present themselves.

Let’s see what happens into the close!  It’s certainly an interesting development so far.

Corey Rosenbloom, CMT
Afraid to Trade.com

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

4 Comments

4 Responses to “Is the SPY Repeating the Exact Same Pattern from Yesterday?”

  1. spock Says:

    Is this HFT algo driven behavior (70% of volume)?

  2. Corey Rosenbloom, CMT Says:

    I've had that thought a few times – particularly with regard with how similar certain days have been.

    The comparison is that it's as if the price pictures are being painted each day in the exact same fashion… or that people/funds are doing the exact same behaviors to create these repetitive patterns.

    That's the heart of technical analysis – pattern recognition – but it's just not supposed to repeat identically. Definitely something to think about and study.

  3. spock Says:

    Is this HFT algo driven behavior (70% of volume)?

  4. Corey Rosenbloom, CMT Says:

    I've had that thought a few times – particularly with regard with how similar certain days have been.

    The comparison is that it's as if the price pictures are being painted each day in the exact same fashion… or that people/funds are doing the exact same behaviors to create these repetitive patterns.

    That's the heart of technical analysis – pattern recognition – but it's just not supposed to repeat identically. Definitely something to think about and study.