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This S&P 500 Chart Pattern Suggests A Big Pullback Is Brewing

From Corey Rosenbloom: A major part of technical analysis (charting) is identifying prior patterns – and their outcomes – and comparing them to what’s happening right now in the market.

It’s not to say that history will repeat 100%, but if it does, you have an advantage over other traders who don’t see the pattern (and who are likely to make the same mistakes they made last time).

We’re seeing a direct Pattern Repeat situation in the S&P 500 and it’s time to study it for a proper plan of attack (what we expect to happen next).

Here it is in full pattern glory:

I’ve been highlighting this pattern with members and wanted to share it with you as well.

We’re focusing on the July to August pattern where price rallied sharply higher and then developed TWO small trading ranges just above the rising 20 day EMA (green).

We even observed a similar negative momentum divergence in the oscillator (red arrow).

Ok – that’s great. We’re mainly concerned with the immediate future and if the outcome from August will be similar – repeat – into January/February.

Let’s take a quick moment and zoom-in on the pure price action with respect to the moving averages:

The left image is the candles (price bars) from July into August and the right image is the current rally.

Does it look familiar? It should – and does. That’s undeniable.

What we’re concerned with is the price action in August AFTER the two highlighted regions.

Price stagnated a bit more (continued to trade sideways) and then plunged lower in September, kicking off a bearish swing that ended in November.

No, the immediate future won’t exactly match the past but there will be echoes and clues savvy traders can use in their game plans into February.

Continue studying the July/August pattern and the September/November outcome and plan today.

The SPDR S&P 500 ETF Trust (NYSE:SPY) closed at $226.74 on Friday, up $0.83 (+0.37%). Year-to-date, the largest ETF tied to the S&P 500 index has gained 1.44%.

SPY currently has an ETF Daily News SMART Grade of A (Strong Buy), and is ranked #1 of 109 ETFs in the Large Cap Blend ETFs category.

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