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Chart Patterns SP500 $VXN $TRAN
Wednesday, April 18, 2007


Weekend Update - SPX, TRAN, & VXN

I would like to review the obvious. I have been watching the SPX RST. However, I have not been talking about it too much, because there has been so many stocks that have made powerful gains despite the SPX RST pattern. Focusing on the SPX RST would create too much anxiety and fear which would result in subscribers not taking trades, or become bearish at the wrong times. Furthermore, they would have missed out on some profitable trades.

S&P 500 chart (SPX) - Daily chart
The SPX is in a reverse symmetrical triangle pattern. However, the RST pattern is weakening. Let us review what could happen. Could we have already topped? Well, the SPX price target is 1285 to 1304. My view is that 1304 makes more sense to me as the price target because that would bring the SPX to the maximum pain level for shorts. Does that have to happen? No.

Now let us review some things. The SPX trend remains bullish, pattern is treacherous, bias is neutral. This pattern supersedes any type of bullish bias. Even though the SPX is rising in price, generally it could turn out to be a very destructive pattern. I do not want to focus on the SPX RST pattern exclusively because we could miss some really good set ups and profitable trades. Money is money. I just want to make sure that we make the most money by being in the right sectors at the right time, whilst never over staying our welcome. We need to be flexible enough to over look what is going on in the broader market while focusing on our stocks.

This is a chaotic pattern-which goes parabolic and creates shock and awe. The SPX chart may look toppy, however it keeps going higher. Indicators and oscillators are bullish. Remember bulls live above 1246 and bears below that. Bias remains neutral. The SPX has the potential of going to 1304.

The Dow Jones Transportation Average (TRAN)- Daily Chart
We already know that the TRAN is in a reverse symmetrical triangle pattern. The TRAN had a down day Friday. Which is one of the biggest sell off that the TRAN had in a while. Despite this drop, our portfolio stocks continue to make new highs. There is no reason to trade out of these stocks yet. However, this does not negate that there is fear in this market. Indicators and oscillators are bearish, but working on a bullish trend reversal.

The Volatility Index - Nasdaq (VXN)- Daily Chart
Fear in the market is high. This is how the VXN works. When the VXN spikes up like that, it illustrates that fear in the market is rampant. Fear is due to war with Iran, the rising price of OIL, and selling begetting more selling. The VXN is so far stretched from it's moving averages that it is bound to bounce back into it's channel sometime next week. Furthermore, has watching the VXN really helped you to trade this market? I doubt it. The VXN was at 18.00 when the Nasdaq was 300 points lower. There are less stocks making new highs than a few years ago. However, we cannot be bearish until confirmation appears.

 






SP500
Index Stock Chart
$TRAN
$tran Stock Chart
$VXN
$spx Stock Chart