Monday, February 9, 2015

NYSE Still in Stuck in a Contracting Triangle

Triangle in NYSE yet to break out
Click on Charts to Enlarge

I recently posted about the SPY being in a contracting triangle and ready to breakout, probably to the upside.  Well now SPY has broken to the upside of the triangle boundaries, but in very weak fashion with no follow through.  Price has now retraced back to the breakout point.

If you look at the broader index of the New York Stock Exchange composite, you can see that it is still within the bounds of a contracting triangle.  There are 3 touch points on either boundary, so from a charting standpoint this is very significant.  The price and time bounds have both been repeatedly respected.

As of the end of this week, we will be at the 50% mark of the time from beginning to apex of the boundary lines.  As we pass beyond that point, a breakout becomes more imminent.  With the size of this pattern, I would infer that the coming trend will be very significant.  The only question I really feel will be important is whether it will be a "clean" break, or whether there will be a brief false breakout and then reversal into the true new trend direction.  As price unfolds I think we should be able to catch whichever scenario occurs.

From an ideal Fibonacci perspective, the 0.618 time point from the high to the apex point will be at the end of the first week of March.  So maybe we see price continue to respect the boundaries for another several weeks and then breakout.  If so one could consider a straddle trade at the equivalent of 10,750 on the NYSE as we approach the 0.618 time division.  I would think that a June expiration or Q2 expiration would be sufficient to capture the lion's share of the probable move to follow in such a scenario.


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