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Wednesday, March 2, 2011

$$ Diamond Cutting

We seem to be cutting a diamond formation on the S&P.  If so, the minimum downside target is 50 points from where price breaks down.

Posted by at

23 comments:

  1. speculaterusMarch 2, 2011 at 9:58 AM

    Good observation. But what would be the likely outcome if the market were to break out of the diamond to the upside instead of breaking down?

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  2. PositionSizingMarch 2, 2011 at 10:26 AM

    speculaterus

    Since it is a reversal pattern at tops, there is no price target for an upside breakout.

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  3. AnonymousMarch 2, 2011 at 10:32 AM

    when you say 50 points from where price breaks, where would you consider the break? from previous lows or from diamond formation?

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  4. PositionSizingMarch 2, 2011 at 1:12 PM

    From the break in the diamond formation. Currently, the minimum target would be 1255-1260.

    To be confirmed, the pattern requires a decisive break in the diamond formation. At this point, it's only a "potential" diamond formation.

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  5. PositionSizingMarch 2, 2011 at 1:42 PM

    Also, a potential H&S pattern with 2 left shoulders:

    1296 on 1/18
    1302 on 1/28

    The head at:

    1344 on 2/18

    And the first right shoulder at:

    1332 on 3/1

    If so, then we should be carving the 2nd right shoulder soon before a breakdown through the neckline.

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  6. UnknownMarch 2, 2011 at 5:20 PM

    Hey Parker! did u find out abouth those indicators i asked you that are in "pit bull"??
    my email is: joeylargman@gmail.com
    thanks a lot and congratulation for your partnership with terry!
    Sincerely,
    Joseph

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  7. UnknownMarch 2, 2011 at 9:04 PM

    Parker,

    Great observation! One caveat though. The trading day is 6.5 hrs long, and 60 min don't divide evenly into it. As a result, either the first half hour or the last half hour is distorted. For that reason, I shy away from 60 min charts. 30 min charts would be more robust - no distortion.

    Is this pattern still valid on a 30 min chart?

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  8. PositionSizingMarch 2, 2011 at 11:42 PM

    Achilles

    I prefer 30 minute charts too. The pattern is the same, however.

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  9. FredMarch 3, 2011 at 9:17 AM

    Parker,

    Since we have a diamond and a triangle formation going on...what would be the levels that can't be broken (to the upside and downside), in your opinion.

    Looks like the upper triangle/diamond is right around 1328 and the lower end is in the 1306-1310 range. At what level above 1328 would you consider it a breakout (and a likely move to 1360-1380). And what level on the downside would you conider it broken...and a move to the 1250 area.

    It is 5 points, 10 points (what number in your opinion).

    Thanks.

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  10. PelicanMarch 3, 2011 at 2:23 PM

    Parker,
    do you think the correction is over?
    thanks

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  11. PositionSizingMarch 3, 2011 at 5:01 PM

    Pelican

    Gosh I hope not. I got short today at SPX 1330.

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  12. DanielBMarch 3, 2011 at 7:06 PM

    I got small short Tues, Feb 23rd and added fri, feb 28th. When the correction didn't take hold Wed afternoon, I almost put on a long, wish I had now, but today was the dealbreaker for shorting for me. I'm long now in a small way. We'll see how it goes. Volatility is dropping and today was strong. 5 to 1 issues, 5 go 1 volume, I'm not shorting in that environment, looks like the start of another few points to me. Also, it broke downtrend resistance. Price resistance is next target at 1344 imo. There's enough people scared of more rally and wanting a correction to keep the short squeezes coming until something really bad happens anyways.

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  13. RobWMarch 3, 2011 at 7:16 PM

    Unless the unemployment report comes in below expectations and traders who went long today get caught leaning the wrong way, I think we're going higher. We'ves seen moves like this a dozen or more times over the past two years, this was the turning point higher.

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  14. onegoalMarch 3, 2011 at 7:40 PM

    a fantastic employment report is a foregone conclusion - that explained the rally today and possibly early tomorrow (they bought the rumor (leaked report to goldman and the boyz- will they sell the fact??? tomorrow maybe not- monday after a long M/E news cycle weekend-more probable)- the middle east issues have not been resolved despite oil falling and closing less than a dollar from the highs (and little snot nosed timmy geitner stating that the us would never run out of oil because they could tap the spr) was your lower lip quivering when you said that "talk tough timmy"- mar 11 is day of Anger, should be interesting - fyi I bought qqqq puts mar/apr last thurs and took some $$$ on monday but kept bulk of position- long fcx puts for a copper puke perhaps.

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  15. PositionSizingMarch 3, 2011 at 8:50 PM

    I'm not married to the trade. If it goes against me, I'm out at a small loss.

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  16. Perma BearMarch 3, 2011 at 9:35 PM

    Parker,
    Now that you have come over to the "Dark Side" I feel a little safer coming out of my cave.
    My calculations show a short term bottom on or about March 22nd in the 1175-1225 range on the S&P 500. If I am right I will post my calculation for the "Black Swan" event that I suspect will occur this summer. If I am wrong I will go back into my cave and hide.

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  17. onegoalMarch 4, 2011 at 8:25 AM

    i think things should be clearer by next wed.- but trend is still up but those two down days last week and the one this past tuesday had some decent down vol. so not sure it is all clear yet..imo

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  18. DanielBMarch 4, 2011 at 12:43 PM

    As much as I'm repulsed by the fact that we haven't had a decent correction in months. With a 10EMA on the $NYADV which closely approximates the McClellan Oscillator and Terry's volume oscillator, it looks like we're getting a rising bottoms pattern again like the latter half of November. Huge selling volume the last couple of weeks, but the lows are holding. If it breaks higher, the market should have legs for a while. Absolutely disgusting.

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  19. DanielBMarch 4, 2011 at 12:50 PM

    All things being equal, that is. Minus some terrible news or oil climbing to the breaking point, etc.

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  20. UnknownMarch 5, 2011 at 9:07 PM

    Two sectors to watch are Paper $DJUSPP the canary in the mine and Airlines $XAL as they bottom first.

    In esoteric technical analysis the diamond is actually a Gann Sq viewe on an angle. You can use Fib #s or the Gwaltney ABCD to calculate the next geometric formation

    Looking for a top April 7 1350-1375 then low of 590-536 2013-13. However, we could slide sideways along here like the 2007 market did and the decline may not begin to Sept.

    Massive forces are holding up this market even though the fundamentals of oil pices, debt, and low GDP keep telling us it can't be so.

    But remember "you can fool some of the people all of the time"

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  21. RobWMarch 6, 2011 at 9:57 PM

    Ah yes, I should have said "Unless the unemployment report comes in below expectations OR oil spikes higher." As a type this, oil is up a $1.50 from it's Friday close, which itself was higher than when I first said the market had turned upward. I'm not so sure now. I'm still long but I have hedged the position to minimize downside risk. If I don't like the situation in the morning I'm going to dump the position and wait for the dust to settle.

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  22. BillHMarch 7, 2011 at 1:20 PM

    Parker

    It sure looks like the SPY has broken the triangle/diamond pattern to the down side.

    http://stockcharts.com/h-sc/ui?s=SPY&p=60&yr=0&mn=1&dy=0&id=p68473808754&a=221711138

    Any thoughts?

    Bill

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  23. DanielBMarch 9, 2011 at 6:30 PM

    I don't see it, Bill. It's still constricting from what I'm seeing. A 4hr chart brings out the division of buying and selling.

    http://chartpostings.blogspot.com/2011/03/consolidation-not-correction.html

    Two converging trendlines at work. It looked like a symmetrical triangle at first, but it's gone too far into the apex now and signals a failed pattern. As long as the lows hold, this is just a consolidation and we won't get a correction. It has to break out of the trendlines one way or the other tomorrow. Then we'll see if we get massive short-covering, or selling, or we just trade flat until the 50day MA catches up. The volume has gotten less and less with each reversal. The question we all want to know is "where from here?"

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