August 6th, 2014 by Leonard


Bearish Rising Wedges………..In the Face of Omnipotence.

Not that the bulls need any help since the E-mini S&P is sitting on the 100 day Moving Average again, but bullish traders are quick to point out that this is the 6th time since June of 2013 that the market has touched down to challenge the 100 day MA on the daily chart. And all the other times it rallied.


Interestingly, 3 of those touch downs took place at the bottom of a giant Bearish Rising Wedge in the year 2013. That pattern ultimately failed and the bears had to cover their short positions as the market rallied.


The other 3 touchdowns to the 100 day MA have all taken place in 2014 at the bottom of an even larger and current giant Bearish Rising Wedge.


The Market today created the 6th touch down to the 100 day moving average at a crucial point since the breakdown of Bearish Rising Wedges normally takes place about half way to three quarters of the way thru the pattern. That would be somewhere in the month of August.


Should the market break down, the downside target is the first low of the Rising Wedge at about 1732.00 by classical standards of price projection.

Double click on chart to enlarge, Then the back button to reduce

Daily E-Mini S&P Wedges 08-06-14


Of course we have this psychological betting game taking place called  “How is the market going to break down?”.  There are those very experienced traders who say ….the market can’t break down  if everyone is bearish and not until it is frothy will it break down. That’s completely understandable as a traditional market psychology.


But then there are those who say that omnipotence comes in many forms. Therefore it is omnipotent if not complacent to say that unless there is froth the market can’t break down.


So then every other day a fund manager in NYC takes an hour break and taxis down to the television studios at CNBC or Bloomberg and sells his or her position in the markets. Some of them are famous and use the media to wage public battles and campaigns to bolster their respective positions. And then we see the billionaire titans waging wars against each other


One thing we as traders know for certain. The market will break down when least expected.


If that were to happen it would certainly satisfy many people watching the most hated bull market of all time. And 1732.00 would only be a mild correction of about 13%.


But think about the benefits


Almost everyone hates this market. The I hate this bull market list is very long.


A big breakdown would satisfy the Obama haters, The Federal Reserve haters, the disenfranchised public who see the market as a playground only for the wealthy haters, all of the famous gurus who lost their standing by calling early  ”tops are in”  haters, most of the Generation Xers who just want to burn the place down haters, the Tea Party I hate government haters, and don’t leave out the Millennials who are busy creating their own alternative universe of haters ..what’s a stock market? …and who watches cable, and who cares haters.


Oh Yah we’ve got a lot of hate going on. And lets not even get into the entire Mid-East, Africa and Russia, There’s so much hate going on in the world that folks have to take a ticket to stand in line for the next opportunity to dominate the news cycle. Putin had to wait for a small window of truce between Israel and Hamas before he rattled his sabers.


And to think ……….all it would take is just one crummy little break of 13% to 1732.00

E-mini S&P to bring the market down to try to say “hello” to the economy and to satisfy so many people. It would be such a relief to have something in the world make sense.


Leonard Novy


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