A Couple Pattern Notes

Click on Chart to Enlarge

Here is an idea of what may been occurring from a pattern standpoint. The short-term trend was up for the last week or two, but Friday's decline wipes out a 2 day gain and shifts the short-term trend back down in my book based on the simple logic of the trend being the direction of the larger, faster moves. With the move Friday, it looks like stops could be placed above 1105 S&P highs for short trades from here. What I would like to see is a gap up or early nice move up for 15-20 points on Monday, and then get short/inverse from there. I don't know that we will get that, but I kind of hope so.

Click on Chart to Enlarge

This is a 60 min chart of SPY. On this you can see the bearish divergence on the MACD on the last two price peaks, and now a cross down. Again this confirms the idea that stops could go in at that 1105 level and should be safe if the downtrend remains in force. Also, this chart highlights a wedge type formation that may indicate that the consolidation is already complete and Friday was a breakdown confirming the start of a new leg down.

In both of these cases my estimation of where the pattern logic suggests the market will go would be to around 950 or 870 as the next basing point. I know that seems absurd, but I truly think that is probably the most likely scenario over the next few weeks from here.