SPY Symmetrical Triangle Part 3
February 24, 2008 – 10:35 am
Part 3 in the SPY Symmetrical Triangle series. It looked like the market was going to close down fairly substantially on Friday, until the news of a possible bond insurer bailout resulted in a rip roaring rally into the close. As a result, SPY is STILL trading inside of the triangle range. As many investors/bloggers are speculating on its future direction, here is a variable that makes a case for the bulls: The VIX.
As you can see in the chart above, the VIX has been forming a descending triangle pattern lately, which generally means that the VIX should be heading lower pending a violation of the base trend line (around 24). If it does indeed breakdown into the lower 20’s/high teens, the market should break the upper triangle trend line sure enough and head a bit higher. Just as the SPY has major upside resistance, so does the VIX at the key levels of both moving averages and recent swing lows at around 18.
With Friday’s selling, most thought it was the violation of the lower triangle trend line, but the market digressed. Monday should be interesting as either bulls or bears will make a strong case and perhaps we will see a close above or below the triangle trend lines, confirming a possible uptrend or downtrend.
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One Response to “SPY Symmetrical Triangle Part 3”
Quite true about the VIX and the triangle. But we could completely invalidate the pattern if the market stays flat (which i doubt bc of the data this week), and travel through the apex. Then again, the VIX has seen massive swing days (feb 22nd). I would wait and see confirming or divirging charts and volume from the QID, SDS and any other correlated products. What do you say?
By Andrei on Feb 25, 2008