Interesting analysis I found online today that mirrors my own Gartley calculations. I haven't been sure whether to use the high from 10/27/11 or 11/8/11 as point X, but I note that the trader below is using the 10/27/11 high.
Attribution: Link
As I examine the current pattern of the SPX right now, No clean or clear patterns jump right out at me. When I find myself a little confused about the current pattern then I get out my trusty Fib measurement tool and start to geometrize. Then usually I get the “Ah-ha” moment. Well I think I have found it, we are currently setting up for a Bearish Gartley Butterfly. I have used these patterns for the last few years and when they line up perfectly they are probably the best trades if found. So I just wanted to explain this pattern as simply as possible. First you using turning point high and measure it to a turning point low. This is the basis for the entire pattern (X-A). Then from this measurement we will try to dissect the A-B-C harmonic pattern for execution.
So given X-A, length of A-B is .786 retracement.
Then B-C terminates at either .382 or .886 of X-A.
Lastly we project D as 1.27% or 1.41% above X-A.
This gives us a target potential reversal zone at 1328 to 1347.
So given I already think this rally is overextended on light volume and pretty “gutless” (Not to mention “super overbought” on the PZO oscillator) I wouldn’t be surprised to see one last blowout to the upside as the shorts get run out then very sharp decline from the levels I have identified. Link to how to use the Price Zone Oscillator.
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