SPX, INDU update part 2: the case of a possible megaphone pattern

This post is part of several other posts: part 1 and 3, can be found here and here.One of my readers of my blog pointed out that a potential “megaphone” pattern was developing. Accordingly, this is one of two change of trend patterns used by Alan Andrews, who developed the Andrews pitchfork. A megaphone forms after a long uptrend, according to the following price pattern:

  • 1. A higher high 2. A higher low 3. A higher high 4. A lower low 5. A higher high that tops out at the resistance trend line drawn from 1 and 3.

For for the SPX that is:

  • 1. 1991,            2. 1904,           3. 2019,            4. 1820,         5. =2040ish?

It would exactly be where major [5] equals major [1], measured from major [4]. It would also hit exactly the 1.382x extension of Primary I (666->1370), measured from Primary II (1074), which is a typical 3rd wave extension, and it be close to the 4.000x extension of Major 1, measured from 2.

SPX update 11032014

The Dow, Transports and the Comp all have the same pattern nearly complete too. Below I’ve only given the DOW.

INDU update 11032014b

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14 thoughts on “SPX, INDU update part 2: the case of a possible megaphone pattern

  1. Thanks again, Soul & Rob.

    Soul, let’s hope for the 10-20% correction because at 40% the overall count becomes very bleak and the 667 low would be revisited. I find that highly unlikely. Also, 10-20% fits better with the current count.

    Rob, 100 day Bollinger Band, interesting. I’ve only used the standard 20 day. How do you use the 100 Day for your trading? I took a quick look at it, currently around 1900, which happens to be about 61.8 retrace of the proposed megaphone pattern top of 2040ish. If the decline stopped there, it would be a perfect retrace for a wave 2 of a subdividing Major wave 5. Using standard fib relationships, Major 5 would target 2350. Quite a bullish target, but possible.

  2. If this is a magaphone pattern, once the target of 2040ish is hit, what is the normal downside target? How would that target effect the overall wave pattern? If I understand correctly, it would suggest the beginning of Primary IV?

    Thanks, Soul!

    • Hi Nate. The completion of a megaphone pattern in this case suggests the completion of PIII or PV. I’d guess it’s highly probable PIII is almost complete. I don’t have downside target. I’m just expecting the lower 100 dbb to crack opento the downside and the 50 dma to take a trip below the 200 dma. Soul’s 1778 target works for me.

      • Rob & Soul, thanks for the replies.

        To clarify, is there a standard downside target for a megaphone pattern based on a characteristic of the megaphone itself? For instance, a downside target could be 1.5 times the length of the 5th (last) wave. Or, is it just a reversal pattern with no standard targets?

        Rob, what does 100 dbb stand for?

        Thanks!

  3. Pingback: INDU, SPX update part 3: the case of extreme market breadth readings over the past 2 years | Intelligent Investing

  4. Pingback: INDU update part 1: the case of 3 counts | Intelligent Investing

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