Tuesday, November 4, 2008

Chart Patterns and Time

Technical analysts claim they can predict the market psychology by looking at chart patterns. However, my observation is they are unable to predict the time the chart patterns will complete. Some technical analysts use additional parameters to predict the time of market turns. Again, they have difficulty predicting the time the chart patterns will complete.

But when I use Fengshui forecast together with the chart patterns, the market timing was perfect. Fengshui can forecast the market psychology.

So, it takes time for the chart patterns to form and complete. A lot of patience is required before we can confirm the continued downturn or reversal in the chart patterns.

2 famous trend reversal patterns are the Head and Should Pattern and the M Pattern or Double Top Pattern. Below is an analysis done by Daryl Guppy on October 27, 2008:

"The DOW is using the slope of the Head and Shoulder pattern neckline as a resistance level. This will limit the ability for the market to recover. Strong resistance is at 10000. The downside support level is near 7500. Watch for consolidation behaviour near this level. The next strong historical support level is near 4000. This is true Depression territory.

S&P 500 is forming an M Pattern. The long term support near 1060 failed. It will act as a resistance level. The valley support level in 2002 is near 780. This is a strong rebound point, but prior to 2002 it had no historical basis as support. Traders will be very alert for rebound and consolidation activity to develop near this support level. Failure to hold puts a Depression downside near 420."

(click on the diagram to zoom out)

One method to confirm a trend reversal of the Head and Shoulder Pattern is the formation of a Double Bottom. A double bottom, followed by A and V patterns as shown in the diagram, confirms the reversal. Another reversal pattern is the inverted Head and Shoulder Pattern. It takes time for the patterns to complete. Time can be in months or years!

Can you tell when the M Pattern formation in the S&P 500 will complete? Can you see the long term trend?

No comments:

DJIA 7thYear Itch -Will 2017 be Itchy?

Take a look at DJIA history for the past 130 years, for years ending with 7, see the following past 13 times (source: Leuthold Group) ...