Reviewing the 2011 time frame; It may be difficult to see on this chart, but one should notice the extreme difference of the daily price ranges in the first half of 2011, as compared to the second half. As 2011 began, we noted that the emerging markets were weakening and have continued to do so all year. It wasn’t until the dramatic decline in the July/August time frame did the domestic markets finally begin to show weakness. Since then, daily price volatility has been extreme. No directional move has been allowed to continue, before harshly reversing its direction.
But now we have enough price evidence to suggest that over the second half of 2011 a clear technical formation can now be identified. All of the price action during the second half of 2011 can be captured within the price “wedge” or “triangle,” as shown on the chart below. This type of price formation shows an increasingly narrowing range of volatility. As this volatility range becomes more and more compressed, it sets itself up for a powerful breakout in one direction or the other. The triangle formation itself does not lend evidence to the direction of that breakout; only that it is coming very soon.
In light of the recent change in the longer term primary trend turning down, along with the bearish alignment of key moving averages, there is currently a greater potential for the eventual breakout to be to the downside in my opinion.
(Click Here to Download Report)
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Special Report: Important Price Formation of 2011
Reviewing the 2011 time frame; It may be difficult to see on this chart, but one should notice the extreme difference of the daily price ranges in the first half of 2011, as compared to the second half. As 2011 began, we noted that the emerging markets were weakening and have continued to do so all year. It wasn’t until the dramatic decline in the July/August time frame did the domestic markets finally begin to show weakness. Since then, daily price volatility has been extreme. No directional move has been allowed to continue, before harshly reversing its direction.
But now we have enough price evidence to suggest that over the second half of 2011 a clear technical formation can now be identified. All of the price action during the second half of 2011 can be captured within the price “wedge” or “triangle,” as shown on the chart below. This type of price formation shows an increasingly narrowing range of volatility. As this volatility range becomes more and more compressed, it sets itself up for a powerful breakout in one direction or the other. The triangle formation itself does not lend evidence to the direction of that breakout; only that it is coming very soon.
In light of the recent change in the longer term primary trend turning down, along with the bearish alignment of key moving averages, there is currently a greater potential for the eventual breakout to be to the downside in my opinion.
(Click Here to Download Report)
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This entry was posted in Market Commentary. Bookmark the permalink.