INDEX:SPX S&P 500 Index
In the early stages of the market recovery we had a typical pattern with a 5(1)-3(2)-5(3)-3(4)-5(5) sequence. The measure of the total 5 wave sequence totaled 555.63. After the 5 waves you have a correction. This correction, however, is unique. In most cases after 5 waves you would see a correction to the downside. With exception of the flash crash correction in April-May of 2010, we have had a correction that went up rather than down. We also never resumed the normal 5 wave sequence after the flash crash. Instead we started an ascending triangle. It is rare to have what is known as an ascending triangle after a five wave sequence, but that is what has happened.
In the chart above we have an ascending triangle. However, something is different. In this chart we have an abnormal extended wave A-B-C-D-E-F. Subsequently, we also have a double breakout.
Taking into account the first 5 wave sequence, which measured at 555.63, and adding that from the bottom of the flash crash capitulated bottom you come up with 1556.95. This is also the measure of the last inverted head and shoulders patterns mentioned below.
* I could not find any research on extended ascending triangles and how breakouts are measured with .
Description of normal A-B-C-D-E wave with three subwaves.
The ascending triangle is a region of horizontal price movement, a consolidation of a prior move, and it is composed of "threes." That means each of the A-B-C-D-E waves have three subwaves. I labeled the B subwaves with red numbers, 1, 2, and 3 as an example. Expect and volatility to recede as the pattern moves toward the breakout, but this is not a requirement.
Inverted Head and Shoulders (see chart below)
Description: In the chart below we have a inverted head and shoulder or head and shoulder bottom (both are the same). Measured head from neckline (39.86) and you add that measure to neckline to find the breakout target. Breakout Target equaled 1564.95