Speculative Diamond Bottom and/or Cup and Handle

This past June I speculated that the market potentially was forming a diamond bottom. Whether or not the pattern was legit, a bottom had formed and a breakout occurred.

Recently I speculated that perhaps the same type of bottoming process was occurring and once again I'll call it a diamond bottom.

Should my most recent call for the pattern not play out, the above chart may be calling for a larger pattern to form over the next couple weeks.

I believe we will see a bounce this coming week. How high will help determine if the 7/13 pattern is correct (use the blue trendlines in the chart below) or if this new larger pattern may be playing.

I have also proposed this cup and handle pattern as well. The handle looks like it is complete, which also correlates well with my most recent 5 min corrective count.

I would assume if just using patterns here, there are a few (whether correctly identified and named or not) that point to this being a continuation pattern. We shall see here shortly.

7/13/11 - EOD Update [9:04 PM Update]

[9:04 PM Update]

Still looks potentially bullish.

[5:49 PM Update]

Compare the SPX and RUT daily. I think they are tracking one another.

SPX- DAILY

RUT- DAILY

DIAMOND BOTTOM?

Look familiar? Remember back in late June I speculated on a similar pattern?



If you need to compare.

EOD Update

Looks like we got the bounce I was looking for today and a little bit more, along with the drop down to complete wave y. At least I believe it is complete at the moment. I'll need to look at the squiggles later to confirm.

I like how it makes the corrective structure more complete and even if you are counting the move down off the 7/7 high as a five wave structure, it appears as though there are five complete waves.

My primary however, has this completing wave 4 of Minor 5 and / or possibly wave [e]. As I previously mentioned, at this point, it doesn't really matter because both options are implying a bounce towards a new high to come, even if it's only slightly higher.

If one were to view this as five completed waves down, then one should expect at least a 38% retrace and perhaps a 50% rebound is in store.

Other things to note is the fact that the market closed back above the 50 day SMA and printed an inverted hammer candlestick. See the image at the bottom.

INVERTED HAMMER

From Stockcharts.com

9/5/10 - DIAMOND BOTTOM?

I couldn't help but look at a chart tonight. The one in particular that caught my attention was my long term channel chart above.

What I noticed was the intersection of the yellow and red channels particularly where the market has been stuck in a range the past few months. I removed the 25 and 75% channels. As you may notice below, the intersecting channels traced out a pretty decent looking diamond pattern.

So we may be at a cross roads here in terms of a breakout of this pattern. The target for this pattern is approximately 1250. Don't forget about the inverted head and shoulders pattern as well.

Regarding the chart above, the pattern alone just speaks of a possible continuation pattern (possibly a pennant?). Ignore the count since it doesn't look quite right (particularly wave 3) but the wedging pattern somehow makes me believe it wants to break to the upside.

5/18/10 - SPX E-Mini AM Update [6:15 AM : Fractal Update]

[6:15 AM : Fractal Update]

The more I look at the chart above, the more I believe that some form of self-similarity is playing out. So far the first two fractals, green and red have retraced their previous swing lows by 61.8%. I'm thinking the purple fractal does the same towards 1150 and then resumes lower to complete the red fractals pattern.

We'll see.

SPX E-Mini

I'm not very familiar with the diamond bottom reversal pattern but Cobra mentioned this last night on his blog. I took that suggestion and incorporated it with what I believed to be an inverted head and shoulders in the works. 

I initially posted this chart last night. So far so good, at least from a inverted h/s standpoint. I don't know if the diamond bottom applies but either way, both indicate a potential an 1161 target (1170 on cash). 

We shall see.

5/17/10 - SPX EOD [10:15 PM Update: SPX Fractals?]

 [10:15 PM Update: SPX Fractals?]

[9:40 PM E-Mini Update]

I like Cobra's suggestion that a possible diamond pattern bottom reversal may be in the works. It works well with the inverted head and shoulders that may also be developing. I'm thinking another pullback will occur overnight towards the gap support area to fill in that diamond. We'll see what happens overnight.

[8:55 PM UPDATE: MINOR C ENDING DIAGONAL?]

?

MAYBE??

[4:09 PM UPDATE]

SPX - PREFERRED COUNT

My preferred count above shows that we may have potentially completed minute [ii] of Minor C. This assumes that the structure from my minute [i] is an a-b-c structure. I have been looking at my 5 min chart again and I believe this option is a viable one. 

I'll try to get a chart out later. Let's just say that the ending diagonal at the top to complete minute [i] had a truncated fifth wave. 

I will also post another option later exploring the possibility that Minor B may be forming a triangle/combo corrective, which will keep us in this range.  

SPX - 5 MIN

You gotta love this volatility. The SPX was down almost 2% today and finds a way to close in the green.

We have another potential hammer reversal by the close on the daily.  A green close tomorrow would confirm it.

I know I had bounced around with my 5 min charts over the weekend, but by the close it became a better structure to count. Not bullet proof but better because if you notice I do have some addtional alternate counts in gray.

I'll put out a chart later today highlighting what I'm thinking the market may now be tracing out.

But for now, let's just say we have a clean 5 waves down to complete either minuette (a) or (i) of minute [ii].

Check back for more later. Gotta run!

I posted the second chart on 5/13. It was just an observation on a potential pattern that may be repeating itself. Today we formed a smaller hammer with a nice long shadow. We saw the same thing back in Feb. Let's see if there is any follow through.

[3:35 PM Update]

 SPX- BEAR COUNT

SPX - ULTRA BULL COUNT