There are similarities between the price action in 2011 and 2022 worth examining. The 2011 chart is on the left and the 2022 chart is on the right. The similarities listed in chronological order are as follows:
1. Major spiking crash (white)
2. Corrective trading range which would eventually serve as support (blue)
3. 100%+ rally off of crash low(gray)
4. Head and shoulders topping pattern (red)
5. 2.2x retrace (teal) of head height measured from 1st shoulder trough to head peak (orange) followed by a significant bounce approaching or reaching the neckline
6. Additional drop down to 2.44x retrace of head height (purple)
7. Rally back up in direction of neckline “We are here” (magenta)
Items 1 through 4 repeating isn’t that shocking but the retraces down to these unusual levels happening a 2nd time is perplexing. If this pattern can repeat to this unlikely extent, then there have to be institutional eyes on it, and it can probably continue to follow the previously charted course in terms of retracement. A continuation of the 2011 sequence from where were currently are (3992.92 on Nov 11, 2022) entails the following:
8. A rally towards the neckline, possible exceeding it, but maybe not. Should approximately hit Target 1 (yellow) around 4200
9. Drop down to a 1.74x retracement
10. Bounce to new ATHs
The way to trade this theory is to wait for price to swing up to the vicinity of Target 1 and then to wait for price to drop down to Target 2. Looking at the time cycle (not shown) implied by the previous two retracements, Target 2 should be reached some time around February, maybe earlier. The time cycle of the 2011 retracements was a little out of time so the timing could be sooner or later than expected. The trade is driven by the retracement levels suggested by targets 1 and 2 so the February time estimate should be taken with a grain of salt. This is another "if this happens, do this" trade idea, not a "buy this right now" idea.
SPX bottomed at 666.79 in March 2009. Anyone who bought that week made one hell of a trade, as did anyone who bought the 1.74x retracement in 2011.
Here is a cleaner screenshot of the chart:
1. Major spiking crash (white)
2. Corrective trading range which would eventually serve as support (blue)
3. 100%+ rally off of crash low(gray)
4. Head and shoulders topping pattern (red)
5. 2.2x retrace (teal) of head height measured from 1st shoulder trough to head peak (orange) followed by a significant bounce approaching or reaching the neckline
6. Additional drop down to 2.44x retrace of head height (purple)
7. Rally back up in direction of neckline “We are here” (magenta)
Items 1 through 4 repeating isn’t that shocking but the retraces down to these unusual levels happening a 2nd time is perplexing. If this pattern can repeat to this unlikely extent, then there have to be institutional eyes on it, and it can probably continue to follow the previously charted course in terms of retracement. A continuation of the 2011 sequence from where were currently are (3992.92 on Nov 11, 2022) entails the following:
8. A rally towards the neckline, possible exceeding it, but maybe not. Should approximately hit Target 1 (yellow) around 4200
9. Drop down to a 1.74x retracement
10. Bounce to new ATHs
The way to trade this theory is to wait for price to swing up to the vicinity of Target 1 and then to wait for price to drop down to Target 2. Looking at the time cycle (not shown) implied by the previous two retracements, Target 2 should be reached some time around February, maybe earlier. The time cycle of the 2011 retracements was a little out of time so the timing could be sooner or later than expected. The trade is driven by the retracement levels suggested by targets 1 and 2 so the February time estimate should be taken with a grain of salt. This is another "if this happens, do this" trade idea, not a "buy this right now" idea.
SPX bottomed at 666.79 in March 2009. Anyone who bought that week made one hell of a trade, as did anyone who bought the 1.74x retracement in 2011.
Here is a cleaner screenshot of the chart:
