Updating the Developing SPX Arc Repeat Pattern You Should Know

Oct 25, 2010: 10:30 AM CST

It always amazes me when price charts repeat almost exactly a previous pattern – but it’s not common to see a pattern this large repeat this intricately as we’re seeing the current “arc” rally structure do.

Let’s get an update on the pattern and see what’s in store next if the pattern repetition continues.

First, this is the current arc pattern that I’m  highlighting with blue arcs.

For a larger commentary on the preciseness which which the market is currently repeating the February-April rally pattern, see my prior intro post:

Unusual Similarities in Structure for Current Rally and Prior Creep-up.”

For reference, here is the prior chart from that post so you can see the comparison easier:

I posted this on October 20th and stated that IF the pattern continues, we should expect a continued rally up after the sell-off from last Tuesday.

And that’s exactly what we saw and continue to see.  The sell-off bar was identical to the one in April, prior to the final push to new highs.

In the top chart, I copied and pasted a blue arc trendline to show the progression from low to highs, and then started the new trendline as drawn off the August lows.

That’s not to say that the market will follow the blue line – it’s just a copied/pasted representation – but that the initial target is a push-up into the 1,200 area, which we fell just shy of on this morning’s session.

A continued push to the 1,200 level – or even to the prior high at 1,220 – would complete the pattern.

Technically speaking, the February rally began at 1,044 and peaked at 1,219, which gives a vertical distance of 175 points.

Projecting 175 from the 1,040 low in August gives us an exact projection target of 1,215.  That will be fascinating if the market tags 1,215 and turns lower.

Anyway, structurally speaking, last week (and this morning) are continuing to trade right in line with the prior model which suggested a push to (at least) one more new high after last week’s (Tuesday’s) one-day sell-off.

And… if the pattern continues and does not break form soon (as in, a push up beyond 1,220), then will we see the second-phase (right side) of the pattern complete… which was a sell-off?

It might pay to be cautious as long as the structure is repeating until something gives with the repeating pattern… or we fall off the cliff again.

Timing-wise, next week’s election and Fed announcement could move the market in a big way.

Corey Rosenbloom, CMT
Afraid to Trade.com

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

4 Comments

4 Responses to “Updating the Developing SPX Arc Repeat Pattern You Should Know”

  1. denali92 Says:

    Based on time, events and market structure, I would actually suggest the pattern completed today.

    The timeline is identical AND we had a similar surge up on April 26th, the day after the G20 Finance Ministers meeting completed.

    The similarities between the last two weeks leading to the top in April and these past two weeks are remarkable!

    THANKS for all of your GREAT insights!

    -D

  2. liubros Says:

    April is also an earning season. The difference of now and April is that most company have a much better outlook for the next quarter compare that in April the outlook is bad. I don't think we can just compare the graphic and conclude that the market is going to fall. I am quite bullish for this market.

  3. Corey Rosenbloom, CMT Says:

    Denali,

    That's a definite possibility – this 'mirror image fractal' would just be a bit shorter/smaller than the prior one, but functionally/structurally, we did get that final push up to a new high today that was forecast by the pattern. So we may not see a push beyond 1,200 after all.

    Will be very interesting to see.

  4. Corey Rosenbloom, CMT Says:

    I agree – and my guess is a good deal of the pattern is earnings expectations/earnings beat based – particularly when factoring in comps.

    Plus, you still have a lot of bears/shorters who are forced to cover (buy-back) with each successive new high, which was a very similar situation that we had earlier in the year.

    So no, no guarantee of repetition into the future, but so far the pattern and price behavior has held up eerily similar.