The chart above is the first of two charts that I am watching that I believe show what is the current primary trend of the bull market that started in 2009. Part I is a look at the primary trend using standard linear price, Part II is the same time period but viewed from a logarithmic price approach. Interestingly, I believe that each chart is currently giving conflicting signals about the current short term status of the market. I believe that this conflict will be resolved soon and thus I think watching both charts has value as each likely offers a look at price levels that other market participants are interested in. These are just my opinion so any comments or criticism why I'm wrong or possibly right is more than welcome.
The Pattern:
For the better part of the nearly 6 year bull market, prices fluctuated within what I would label a rising bullish channel where prices are bound both on the upside and downside to the primary rising trend lines. After 5 years and at the end of 2013 the SPY price finally broke to the upside. While I'm not aware of rising channels having specific price objectives for upside breakouts, it is widely accepted that breaking above the channel is bullish and a sign of buying intensity and upward continuation of prices. It is likely the break of this channel in late 2013 and subsequent successful back test that got most participants even more bullish on the market for 2014.
Current Status:
Despite the damage done last week to almost every other trend line I have seen, the top trend line to the rising channel has not been breached and in fact will come into play some where around 187-189 area depending the time. An overshoot to the downside of both trend lines has occurred throughout the 6 years and even if we get a slight overshoot here, a quick bounce back above and bulls would still likely accept that this pattern is intact.
Short Term Outlook:
In the very near term is looks quite reasonable to expect a bounce some where near the rising trend line of 187-189. In addition to that I have a line marked around 188 to show where these is likely to be significant support from what was once resistance. For nearly three months this year prices bounced up and against that area and to plunge straight through this level seems unlikely but also not impossible. So with a rising trend line and a significant area of price support approaching this seems like a logical area for S/T bounce. In addition, a bounce here could be the start of a H&S pattern so many are expecting to form. In this case it would form a downward sloping H&S which are generally more likely to see a successful break to the downside.
Long Term Outlook:
As mentioned above I'm not aware of price objectives associated with the rising bullish channel breakdowns. However, breaking below the rising trend line would I think be viewed widely as a failed breakout and I would expect prices to move through the channel back down to the lower part of the channel as a initial price target. A move here would be less than a 20% drop from the ATHs. From there it would need to be reviewed as to whether a full breakout to the down side is likely with a price target of ~150 being the next level to watch.
The Pattern:
For the better part of the nearly 6 year bull market, prices fluctuated within what I would label a rising bullish channel where prices are bound both on the upside and downside to the primary rising trend lines. After 5 years and at the end of 2013 the SPY price finally broke to the upside. While I'm not aware of rising channels having specific price objectives for upside breakouts, it is widely accepted that breaking above the channel is bullish and a sign of buying intensity and upward continuation of prices. It is likely the break of this channel in late 2013 and subsequent successful back test that got most participants even more bullish on the market for 2014.
Current Status:
Despite the damage done last week to almost every other trend line I have seen, the top trend line to the rising channel has not been breached and in fact will come into play some where around 187-189 area depending the time. An overshoot to the downside of both trend lines has occurred throughout the 6 years and even if we get a slight overshoot here, a quick bounce back above and bulls would still likely accept that this pattern is intact.
Short Term Outlook:
In the very near term is looks quite reasonable to expect a bounce some where near the rising trend line of 187-189. In addition to that I have a line marked around 188 to show where these is likely to be significant support from what was once resistance. For nearly three months this year prices bounced up and against that area and to plunge straight through this level seems unlikely but also not impossible. So with a rising trend line and a significant area of price support approaching this seems like a logical area for S/T bounce. In addition, a bounce here could be the start of a H&S pattern so many are expecting to form. In this case it would form a downward sloping H&S which are generally more likely to see a successful break to the downside.
Long Term Outlook:
As mentioned above I'm not aware of price objectives associated with the rising bullish channel breakdowns. However, breaking below the rising trend line would I think be viewed widely as a failed breakout and I would expect prices to move through the channel back down to the lower part of the channel as a initial price target. A move here would be less than a 20% drop from the ATHs. From there it would need to be reviewed as to whether a full breakout to the down side is likely with a price target of ~150 being the next level to watch.
