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suriNotes

Patterns in S&P500 Index

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Here are potential scenarios from S&P's daily chart patterns.

 

1. The most visible pattern in S&P since June 2010 until now (Nov. 12, 2010) is Inv. Head and Shoulders. Late Sept. SPX traded above neckline to confirm Inv. H&S pattern. The target for Inv. H&S Pattern is 1250 (100% of Necline to low of Head). This target is also inline with X5 target 1231-1246 (price cluster).

 

2. The current famous pattern is Trader Vic's 2B (2T) Pattern. It is a form of

irregular Double Top formation. First Top is from Late April at 1219 and the second potential top is on Nov. 5th at 1227. If S&P slides and closes below 1195 (also 21-EMA), it may confirm 2T pattern. The trigger for a short-trade is to enter the low of

the bar which closed below 1195. Set a STOP above the Nov. 5th High + few points (1229-1230). Target is at least the 50% of swing range nearing the Neckline (or 'B' in X5 pattern). Ultimate target for 2T pattern is between 61-76 of prior swing.

 

3. Last but most vivid pattern is X5 pattern. It says, current slide may be just a pullback.

In that case, next price cluster may offer some resistance (1231-1246). If price

reverses from current sell-off and trades higher, there are two possible scenarios.

 

'D' is trading outside of XA range

A. Bearish Butterfly (Target 1.27XA to 1277).

B. Bearish Crab (Target: 1.62XA: 1350).

 

4. ABC Bullish pattern is also embedded in the X5 pattern. It shows the

Price and Time Targets coinciding with some of X5 target ranges.

 

Disclaimer: The chart analysis provided here is for educational purpose only.

 

Regards,

Suri

 

 

attachment.php?attachmentid=22917&stc=1&d=1289614050

 

attachment.php?attachmentid=22918&stc=1&d=1289614050

 

attachment.php?attachmentid=22919&stc=1&d=1289614050

SPX_2TTop.gif.438c61aa8c91ffc1fc942e967df7aaf8.gif

SPX_X5.gif.78182e0e5f974e03f047edaa5633d8a0.gif

SPX_ABC_Nov1110.gif.9d961480fcc32f9cf6564aae51d7686c.gif

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Hello Suri Sir,

 

Thanks for the charts .

I would like to know your view on this bearish butterfly?? Can we consider it a valid one, price made a double top here but still PA is not strong enough in this PRZ.

[if you don't mind I am using your chart to make my point ]

 

I am also adding one more chart with andrew's median line.

Let us see how it will unfold.

 

Regards,

TAQ

SPX_X5.gif.e21f23f0ce3dc0899ed6d3de82ee2f55.gif

f240.thumb.gif.da509ffe8a6c15487f5c8569245d77eb.gif

Edited by taq

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Hello Suri Sir,

 

Thanks for the charts .

I would like to know your view on this bearish butterfly?? Can we consider it a valid one, price made a double top here but still PA is not strong enough in this PRZ.

[if you don't mind I am using your chart to make my point ]

 

I am also adding one more chart with andrew's median line.

Let us see how it will unfold.

 

Regards,

TAQ

 

 

Hi TAQ,

 

Thanks for your post and re-drawing Bearish Butterfly pattern.

I like your Pitchfork/Median Line drawing too.

 

Yes, only the short-term trend is signaling potential trend-reversal but both Intermediate and Long

term trends are intact (bullish). Even the short-term trend is not confirmed. For me, if SPX closes below 1183, I would think short-term is reversed to bearish and probably look for shorting or close longs. In SPY, I would look for price to close below 118.5 for trend reversal. My targets in SPX are still near next price cluster 1240-1250.

 

Regarding your drawing of Bearish Butterfly pattern, I would not fit ratios to draw the pattern. In my view, it is opposite as pattern must show the ratios. If the ratios agree within a defined range, then you conclude as a certain pattern. I never consider intermediate pivots (like your drawing of X pivot) to be a key level part of the Bearish Butterfly pattern.This is the reason I dislike some of the drawings in Wolfe-Wave as some traders draw from an intermediate pivot levels to connect and re-define as Wolfe Wave. But I am no expert in Wolfe Wave either. I always tell myself that there are NO perfect patterns which fit exact ratios in the markets.

 

Here is the SPY Chart.

 

Regards,

Suri

 

attachment.php?attachmentid=22937&stc=1&d=1289782385

SPY_Nov1410.gif.3b9fbc99048e6505c7672037d1176ade.gif

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Hi TAQ,

 

Regarding your drawing of Bearish Butterfly pattern, I would not fit ratios to draw the pattern. In my view, it is opposite as pattern must show the ratios. If the ratios agree within a defined range, then you conclude as a certain pattern. I never consider intermediate pivots (like your drawing of X pivot) to be a key level part of the Bearish Butterfly pattern.

 

 

I understand your point.Thanks, I will remember that.

 

Here is the ES daily chart, I draw the swing Highs/Lows.I would like to know Which pivots you consider as not valid & why??

 

Regarding Median Line. I am watching downward red fork if reverse from upper downsloping line than I would consider going shorts here problem is the blue upward sloping fork is still valid will watch price @ quartile & lower ML .Let us see how it will unfold .

 

Regards,

TAQ

f241.thumb.gif.a2ca23212b8ff11bb6abfb5f87a375c8.gif

f242.thumb.gif.87df21de87189c56c4fdd6c69d31166d.gif

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Hi Taq,

 

Thanks for your post.

 

You can't have a Major SwingHigh Pivot followed by another Major SwingHigh Pivot without having a Major SwingLow Pivot between them. All the Pivots between Major SwingHigh Pivot and Major SwingLow Pivots are considered Intermediate Pivots.

 

Regards,

Suri

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Hi Taq,

 

Thanks for your post.

 

You can't have a Major SwingHigh Pivot followed by another Major SwingHigh Pivot without having a Major SwingLow Pivot between them. All the Pivots between Major SwingHigh Pivot and Major SwingLow Pivots are considered Intermediate Pivots.

 

Regards,

Suri

 

Thanks Sir,

If possible an example would be appreciated.

 

Here What I understand from differnet readings & your points.Correct me if I am wrong.

 

For 5-point structure XABCD, X & A has to be major Swing High/Low & B & C intermediate SH/SL , Point D can be intermediate SH/SL (in gartley & bat) or Major SH/SL (in butterfly or crab).

 

Regards,

TAQ

f241-2.thumb.gif.84a2fd011fbd52ff2884394fc84aa995.gif

Edited by taq

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Thanks Sir,

If possible an example would be appreciated.

 

Here What I understand from differnet readings & your points.Correct me if I am wrong.

 

For 5-point structure XABCD, X & A has to be major Swing High/Low & B & C intermediate SH/SL , Point D can be intermediate SH/SL (in gartley & bat) or Major SH/SL (in butterfly or crab).

 

Regards,

TAQ

 

Hi TAQ,

 

Here is the SPX chart with X5 marked.

 

Regards,

Suri

attachment.php?attachmentid=22966&stc=1&d=1289923836

SPX_X5_Nov1610.gif.d14b9215b6b6c2af66cb2d39ee9033fc.gif

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Here is a collage of X5 Patterns in key Tech/Financial stocks....

 

Regards,

Suri

 

attachment.php?attachmentid=22975&stc=1&d=1289938508

 

Very nice collection of colorful butterflies.

Is there any pracical use for them appart from the artistic value?

 

Gabe

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Very nice collection of colorful butterflies.

Is there any pracical use for them appart from the artistic value?

 

Gabe

 

Hi Gabe,

 

Thanks for your comments.

 

Butterflies are part of Harmonic Patterns. When point 'D' (current) is traded in the key reversal zone (see the right side of each chart showing Potential Reversal Price Clusters), it signals close the longs or sell short. Butterflies (all X5 patterns) also have ABC patterns embedded. So, I trade both CD (long setup:bullish) and Shorts from D levels when other market context agrees... The other Harmonic Patterns are Gartley, Crab, and Bat setups. If you are not familiar with the Harmonic Patterns, search for Scott Carney and his work (I think his work is the most brilliant !!).

 

I posted the collage to show the phenomena exhibiting the confluence of Butterflies in Tech and Financial stocks. Yes, Butterflies are Colorful...

 

Regards,

Suri

Edited by suriNotes

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Here is SPX chart with Bearish Butterfly Pattern...

 

Regards,

Suri

 

attachment.php?attachmentid=23348&stc=1&d=1292457266

 

Have you tried to trade these?

 

I have. My experience was neutral. I made some money and lost some money. I traded them mainly in a small currency account. I didn't find them to be profitable so I stopped.

 

I forgot the guy's name who was nice enough to code the patterns in MT4 (something with a Z). The indicator was really nice, but It wasn't adding anything over time.

 

It could have been me too. I am not one to blindly allow a trade to stay on simply because its a pattern that sometimes works.

 

 

Regards,

 

MM

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Have you tried to trade these?

 

I have. My experience was neutral. I made some money and lost some money. I traded them mainly in a small currency account. I didn't find them to be profitable so I stopped.

 

I forgot the guy's name who was nice enough to code the patterns in MT4 (something with a Z). The indicator was really nice, but It wasn't adding anything over time.

 

It could have been me too. I am not one to blindly allow a trade to stay on simply because its a pattern that sometimes works.

 

 

Regards,

 

MM

 

*** This is a response I posted to a user in another forum to a similar question **

 

Hi MM,

 

Thanks for your question.

 

I have been trading X5-Harmonic Patterns (ABCs, Gartleys..) and other Geometric Patterns (Triangles, Rect. Channels etc..) all my trading career of 15+ yrs. Complex patterns like Harmonic Patterns are difficult to detect with naked eye (at least the proper ones which follow their rules) and even more difficult to code/backtest. Building rules to trade patterns successfully is another challenge.

 

The reliability of any pattern or indicator is subject to it's structure, market phase, type of filters applied and user's experience... I would rate Harmonic Patterns as the 50-60% reliable overall but with the right market context (filters, phases), I would think their reliability increases to 70-75%. There are other patterns which may be little more reliable than X5 patterns, but Harmonic patterns are my bread-butter setups. Also note there are NO perfect patterns and all patterns fail. I have built my own theory of Market Context and other supporting tools with filtering mechanisms to trade them when opportunities present. Harmonic patterns are also part of many other patterns like simple H&S, DB/DT, Triangles and Complex patterns like Wolfe Waves and Elliott Waves.

 

Harmonic patterns appear in all instruments and in all time-frames. This is at least my nth generation algorithm (wrote from scratch each time) I am attempting to write X5 (all Gartley variations) patterns in the last 5-6 years. I think this time I may have the best algorithm. Once I complete I will attempt to write more filter logic. I wrote Auto ABC Pattern detection few years ago and currently I use it for my trading (intraday and EOD). The key is to detect these patterns with absolutely no-delays. Now I have achieved that with both ABC and X5 Harmonic algorithms. They also generate auto Entry, Stop and Target levels for each setup.

 

Hope I answered your question.

 

HAPPY HOLIDAYS!!!

 

Regards,

Suri

Edited by suriNotes

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