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.
Too early to spot a new ATH on the horizon, but the analysis was clean and succinct. Good job.
Skipper86
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@iSovereign, The theory is that 2011 is repeating in which case a new ATH is the expected result.
Muzaaa
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Interesting analysis. Good job!
JoeChampion
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i'm waiting to buy around 3900! good job
orimichaeli
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Nice chart but wrong. You are ignoring from fundamental.
Skipper86
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@orimichaeli, I have plently of recently-published ideas looking at fundamentals.
Chartguru1
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@Skipper86, kudos. Finally I luv seeing this chart. 5500 is where I get out and short to oblivion
Ryan1993
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@orimichaeli, I agree and people also compare this to 2008 before the big drop happened. Except in 2008 there was a major catalyst. We all been there where we believe we see something in charts that other do not see. It is cool to make a prediction. However I would like to see what percentage of their portfolio that they commit to their prediction.
SoManyDistractions
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@Ryan1993, Would you say the catalyst in 2008 was the housing bubble? Which was caused by too much debt relative to what could be financed. How is that much different than what occurred during COVID? The government took on more debt than ever, couldn't that be the catalyst for a new crash? And now, we won't have the luxury of low interest rates... our debt is going to cost more to pay off. What do you see in the charts im missing?