Friday, November 28, 2008


Looks like we're in a bear flag or a rising wedge (close-up view). This pattern usually spikes higher and moves laterally toward the top of the flag/wedge and then falls off a cliff quickly. The volume should also be decreasing each day (regardless of whether it's a holiday week or not). It's important to short as quickly as possible because the breakdown almost always falls much faster than the time it took for the pattern to materialize. The top of this pattern must be paid attention to as it could be a false pattern. This is most easily determined by Fib retracement levels. I did lose a few % today covering some test shorts, but it's all part of the game. Knowing when to let go of a position avoids ruin. Monday should give some additional guidance to short provided that the pattern doesn't fail and monstrously breakout to the upside which I highly doubt will occur.

SPX 1-day

SPX 3-day

SPX 10-day

SPX 6-month

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szaman said...

John- Love your site.I am learning a lot from you. What are you expecting for monday? Gap up to 906 or Gap down? I weanted to take some short today but didn't dare. Waiting for monday.

TMI said...

That's not a question for John, you should ask Jesus about that.

This rally is bullshit! I'm ready to short as soon as people finish with their holiday euphoria. Hope everything pan out as you predicted.

John C. Lee said...

I would just wait for the actual breakdown for a safer entry. I do not know what will happen Monday.

goomavitrader said...

Hi John,
I see all charts have V shape recover with low volume week. What is your take on V shape here? Thanks