SPX Outlook

The last couple weeks have been very interesting. And today I wanted to put my opinion on the recent price action.

Looking from Feb 19th to today looks very sloppy. Price has been very choppy with no real direction except sideways. From the high of 1530 I have drawn a down trend line (in yellow) and from the corresponding low, I drew an up trend line. In doing so we have identified a symmetrical triangle.

Now that I have pointed out the obvious, I want to put my prediction on which way it will breakout.

There are a few things that I have too consider, first I need to consider we might be in a topping pattern. And second I need to consider the statistics with symmetrical triangles in a “bull” market.

I have witnessed many short term tops, and this certainly feels like we are forming a top. In a typical short term top you will see dips get bought with no new high. Next, when buying is finished we sell off back to where the buyers stepped in. This action is what causes the symmetrical triangle in the first place.

The other thing is the statistics of a symmetrical triangle in a bull market. Looking at the numbers it seems to favor the upside breakout, but by a small margin. The statistics of a downward breakout in a bull market is 7 out of 10, and the upward breakout in a bull market is 8 out of 10.

So my prediction is a downside break to the 1460 level. I came to this because of the small margin on the actual statistics and the price action of a topping pattern.


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