I have discussed these patterns in here before. First of all, they are not the holy grail by any means. However, you will find these patterns at many key turning points in markets. We have a broadening pattern here with very good symmetry, the first requirement. It has to have expanding pivot points, requirement # 2. The safest way to enter them is a close on the day following the formation above/below the last leg of the pattern. In the case of today it is a long travel to get there and very unlikely to happen. It if did get down there I would wait for a bounce to get short. If it travels that far it might be exhausted by the time it trades through the low. If you front ran the entry intraday at the low, which I do at times, it is likely you would suffer an immediate draw down.
I need to have other things going on to support these trades, and I do not see anything else to support this short at this point. I am drawn to this pattern though simply because of it's symmetry and the trap nature of how this looks. The last few days were very interesting, my mentors up seasonal call in the end turned out to be correct. Now you know why I have a hard time disregarding his views. Nonetheless I still should have taken that trade it would have been exited with a big profit during Sunday's night session due to what I explained in advance has been the tendency on month end declines.
This type of pattern shows up often on intraday charts so is really a better day trading pattern anyway. I just wanted to show it here because it is such a clear one. It is my view with any pattern that it should not be forced. It should be obvious it is there or it is not a trade. Also look for at at key retracement areas or extended markets. It is not a pattern to be used in consolidation periods. Now if today forms and inside bar, it messes this up a bit for the next day. The entry point would still remain a close below Tuesday's low, ignoring the inside bar. For me it is such a large stop, and against one of the greatest trends in history, so it is not a trade I am going to be doing. There is also a seasonal top due here, and also some bigger picture cycles coming due today, so I am still looking for things to turn down in the near term. That is not enough though for me to take a trade like this. The overall rally won't end until the FED decides it will.
I know I am picking up some new readers as the word is out on the PPT and what they are doing, and people are surfing to read about this manipulation. As I watched the San Diego open and the artist formerly known as Tiger Woods hack it around the course, it reminded me of what we have happening in the markets here. It has been my contention that ever since the story first broke on Tiger over a year ago now, that we would never see him regain his form. My reasoning behind that view was that it was such a rare combination of things all in one person ( seemingly ) that there was a reason we had never seen it before. It was a once in a lifetime period that we won't see again. He had one year he did not miss a single putt inside 4 feet! Even a machine putting the exact same put on a green would not be able to do that. He was the perfect storm, although as we know now there were flies in the ointment all along and they finally came out. That will also be the case with the stock market rally sponsored by the FED. They are creating a massive bubble in asset prices here, and the flies in this we all already know about. It will end how Tiger ended for the same reasons, what we are seeing is a manipulation not a portrayal of reality. These illusions do not carry on forever.
I for one as a scratch golfer myself, ( .5 index to be precise ) feel lucky to have been alive and been able to have watched him in his prime. He was the greatest of all time even though he is probably not going to break all of Jack's records now. Watching the combination of nerves, power, and delicate touch he had in his prime was something I will never forget. However, now it is over and I doubt it is coming back even though he is trying as hard as he can to get there. So it will be with the FED once they stop pumping money in like they are now. Enjoy it while it lasts, it has never happened before, and it will not last forever, but now is a great money making opportunity.
Here is a market that is talked about often, and is just a mess right now, the 10 YR Notes.
Many of my friends along with me have been looking for a rally in this market, and you can see this sucker is just flat lining here. At this point without a stock market decline of some type, this market is not going to rally. Here is a perfect example of where manipulation is not working. The FED is trying to move rates and equities and commodities higher, and the dollar down. They are getting most of that done, but they are not keeping rates down. I always tell people rates are determined in the free markets, not by the FED. This is a perfect example, interest rates have risen during QE2 thus far.
I do not see a much out there today other than possible declines in the ES today. There is marginal sell in Silver I am watching. I also was looking at a long in Cocoa, but that appears to be off the table for today now.