Charting: Fear is Good

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Evening folks

Fear is good, particularly fear which is already priced in and not utterly devastating to the world economy. One key reason I believe this type of fear is good, is because it keeps buyers from stepping into the markets all at the same time. This type of fear gives us a good rotation ratio of buyers to sellers, allowing the markets to "climb the wall of worry". Those lagards on the sidelines will continue to disbelieve and churn, getting burnt up over losing out on making money. Eventually they will step back in, perhaps this is when buyers will get exhausted…

Here's an update from last Wednesday's "Some Alternative Views" blog.

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AGG

• We show potential for a mirrored Ascending Triangle, if the pattern repeats, then we may re-test the 2015 high in early March
  
• Conversely, if the dominant rising trendline is breached, then we might expect another test of the horizontal line at 110.10
  
• As a means of confirmation the bottom is in, I'll be looking for declining volume to subside
  

Update: The dominant trendline has been breached, as of yet I haven't seen signs of a bottom. I expect the previous triple top to get tested, volume has not subsided, and the 50 SMA has been breached. We know this isn't the traditional season to be invested in bonds, if you try to pick a bottom here, it should be because you want a place to park your money (not make money).


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SPX

• We have a Fibonacci Price Channel drawn in, this is the overall containment field for prices to reside
  
• While the 39-day channel may appear to be rising, off the 1973 bottom, linear prices are falling and currently reside at 2036
  
• Based off the previous 2094 top, if/when the arc of volume dries up, I expect the downslide to resume, perhaps in early Mar
  

Update: The Linear channel has aligned with my Parallel Fibonacci Price Channel, we are at the top of the range. Volume is still decent, at current levels, buyers are still able to outpace sellers. While momentum does appear to be waning, the continuous fear in the markets combined with "late to the game" buyers" may enable us to consolidate and continue higher. I have a long-term chart which shows potential for tagging 2148 (161.8% Fib projection from Oct 07 top to Mar 09 bottom)


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W4500

• The 1057 area has acted as resistance twice, but has yet to act as support
  
• I'm not a strong proponent of cycles, sometimes they work, other times they don't
  
• For Sep/Oct/Dec this particular cycle matched up well and at the moment is somewhat discombobulated, but still appears to still be holding, with an upcoming peak near the end of Feb
  

Update: I still think 1057 holds importance, particular if we pullback from current levels, this is roughly a 50% retrace from the A-B wave.


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For myself, I've been playing it conservatively this week, which "loosely translated" means I'm sitting on the sidelines watching price pass me by. Fortunately, I was able to catch about 86% of W4500's price move, while at the same time missing out on 70% of AGG's decline, so while today's F-Fund gains were disappointing, the bigger picture of my strategies remain largely intact.

Trade safe…Jason

Bonus Chart...Will the time zones hold?