Market Digests Selloff into Intraday May 7 Triangle

May 7, 2010: 1:50 PM CST

As I wrote in this morning’s post, the market needed to digest or consolidate after yesterday’s sell-off… and that’s what we’re seeing now.

The market intraday has formed a near-perfect symmetrical triangle with clean boundaries you should watch as short-term reference levels.

According to the Range Alternation Principle, markets alternate between periods of range expansion (yesterday’s massive sell-off) and range contraction/compression (today’s triangle).

Thus, as wild as the market seems, it is still following time-tested price principles.

For now, monitor the index level of 1,120 as the overhead resistance trendline and 1,110 as the rising lower support line, with 1,115 as the “Value Area” the market participants have so far agreed as ‘fair value.’

We could see range expansion pick up again if we get a firm break of these areas, but for now, it might be helpful to see the triangle pattern and watch its boundaries as it continues to develop.

Corey Rosenbloom, CMT
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4 Responses to “Market Digests Selloff into Intraday May 7 Triangle”

  1. terlyn Says:

    It looks like it was a rounded reversal.

  2. Corey Rosenbloom, CMT Says:

    My favorite pattern!

  3. Monday: Market Bounce « Andrewunknown Says:

    […] activity formed a symmetrical triangle the S&P (noted by Corey Rosenbloom here, among others) at the 61.8% retracement of the 02/05/2010 low at 1045 and the 04/26 high at 1220 […]

  4. bernard12 Says:

    I don't necessarily see the gravity in using a 5 minute chart to test for consolidation in such a broad market index, but to each his own. The markets are clearly manipulated and influence by the self fulfilled prohecies of TA. Small caps are highly influenced by TA and volume and are thus a great way to play the 5 minute chart if you like to.