Whilst perusing my LinkedIn account I came across this reply to an already bloated and nonsensical piece supposedly analyzing the market – the chart in question looked more like someone had picked up a bowl of pasta and lobbed it against the wall. Responding to this masterpiece of analysis was this enlighting gem.
Please permit me to explain a bit about how Traditional Technical Analysis compares to the 6 Level Price Pattern Coordinate form of analysis I’ve developed over the past 20+ years.
Iin the Price Pattern Coordinates System, the return to the “neckline” is precisely measured as a “Reverse Kucci” aka. “Falling Spike” Formation where the upper Time Price Levels remain in a Negative Cycle Stage such as “Da” , “Md”, “Sd” or “Db” while the lower Levels rise to a Positive Cycle Stage. Usually this results in a “2Ua 4Da Kucci” (Positive Level 2 & Negative Level 4).
To specify, the initial drop from the “Head” of the “Head and Shoulders” Formation turns Level 4 from Positive Stage “4Ua” to Negative Stage “4Da” w/ the Negative Event of 4Dax, then the “Shoulder” forms with the Positive Event of Level 2 turning Positive with Positive Event 2Uax. That forms the “Reverse Kucci”. where Negative Divergence can easily be seen on the Coordinates of at least 4 out of the 6 Levels.
Next, the Fall begins when Level 2 turns Negative again with Negative Event 2Dax and the “neckline” is breached.
Spot the person who still lives at home.
This is one of the key problems with technical analysis most of it is geared towards pontification and not trading. It is little more than a glorified public wankfest. Below is a chart of the S&P500 generated from a free service with nothing two straight lines.
Analyzing this chart is simple.
- The market had been in an uptrend that was a continuation of the uptrend from the GFC – the COVID drop proved to be little more than a bump.
- Price now seems to have paused and is marking time.
- We don’t know nor can we infer in any way which way price will go – all we can do is formulate strategies that take into consideration all possible outcomes.
- If the price drops we are bearish.
- If the price rises, we are bullish.
- If price tracks sideways we are in danger of being chewed up if not careful.
- Most importantly I don’t have a friggen clue and nor does anyone else.
Financial analysts are often criticised for their reliance upon narrative rather than data but the same fate befalls technical analysts who believe that somehow the market knows about their complex analysis and will conform to their viewpoint. One of the best parts about trading is that the market doesn’t know who you are nor does it care about you. For many, this is a blow to the ego but for others, it is liberating since it has no preconception about who you are where y are from or what you are capable of.