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Thursday, August 25, 2011

Oh, Me of Little Faith

I'll admit, after watching more than a few patterns fail over the past day or two, I was feeling a little snakebit. 

On Tuesday, we completed a nice little bearish butterfly pattern at the 1.272 extension.



But, the next morning, we were up 20-points in spite of horrid economic news -- nailing, instead, the 1.618 extension.  Thankfully, a quick reversal followed, confirming the butterfly.  Miller time, right?



Of course, the reversal was a headfake.  I watched dejectedly as SPX soared and my ego slumped.  Fifteen points later, I was on my third Excedrin of the day, wondering where my wife hid the Oreos.

My only hope was a little H&S pattern that looked suspiciously like the one a few days before, and a shabby little rising wedge.



I snapped a picture, but didn't have the heart to show it to you, my faithful partners on this bear hunt.  My fears were realized when the market rode BofA to the moon this morning.   I was clearly no match for Warren.

My only hope was to criticize the deal, get a few million people to read the critique, sell their BofA (and everything else, while they were at it) and bring stocks back to the neckline of my pathetic little H&S pattern.  Not too much to ask, right?

Apparently not.


 The completion of the pattern should send SPX down to 1120.  But, the really cool part is that it completes a bigger, not-so-pathetic H&S pattern that could send SPX to 1040.


Recall that 1040 is one of those key targets we've been talking about, as it corresponds with the last major low of last summer's swoon.  That particular low is, itself, the origin of gobs and gobs of important fan lines, so I think it's pretty über-important, itself.


Will it all unfold as planned?  We'll see what GDP and BB have to say about it tomorrow.  Irene might even slip in a word or two.

As for me, I'll be glued to my monitor -- Excedrin and Oreos nearby.   Okay, maybe some champagne on ice...just in case.


9 comments:

  1. Great post!

    Buffett hasn't experienced investing during a deflationary depression. He is about to learn an important history lesson.

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  2. LOL!!!!

    Best thing I have read in a while.........thank u for that.

    I'm looking at two possibilities:

    1- We are caught in a triangle that will take us down to 1125-1135 then up to about 1170 before finally breaking down to about 1080ish.

    2- We get a strong pop to 1205-1220ish hang for a day or so then begin a rather strong decline to about 1060ish.

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  3. I really like the honesty Pebblewriter.

    I figured that we would need to hit the 1200 to test the retracement and complete a C wave. The EW is analytical, but your harmonic patterns seem much more accurately predictive.

    You have helped accelerate me up the learning curve. Thanks.

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  4. Thank you, all. I'm humbled. One thing for sure, this next week should be eventful.

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  5. There is a slim chance tomorrow maybe an non-event. Some drop after the GDP revision, then up after misread of JH. Then we spend the weekend to argue if BB mean QE3 or not.

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  6. Do you think tomorrow will be eventful pebble?

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  7. My gut says yes. I think a big part of the rise this week was leaks re the Buffet/BAC deal. Remember the other day, when financials led the way up in the face of atrocious econ news?

    The only other reason has got to be high hopes for JH. Trying to read the "public" I think a lot of people still think: (1) there's no recession at hand, and, even if there were... (2) Ben will make it all better.

    BTW, did you see that crazy rising wedge backtest!?! One of the most impressive I've ever seen.

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  8. OK. About the public's "hope" on JH, perhaps I don't know how to read the minds of bull traders. But most main stream opinions are there won't be anything out of JH. Nothing explicit.

    The bond market, USD, gold all price "nothing" in. Unless the equity traders are utterly stubborn to try it and be run over.

    Your (1) or (2) are still a reasonable mindset. I guess people need to believe one of them will work. So 2010 again.

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  9. It's an educated guess, at best. But, we won't have long to wait...

    And, no, I have no idea why there's an ad for laundry coupons on this site!

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