The market has moved out of the stalemate associated with the end of the large pink T structure (pushing down) and the final weeks of the red 'Brexit' T structure (pushing up), and resolved to the downside.
I thought it would be interesting to look at the bigger picture and discuss 'double' bottoms.
Terry Laundry suggested that a double bottom resolves into one large T structure with the 2 major lows combining forces. We place the centre-post or vertical line of the T half-way between the 2 lows, and then draw the left-hand side of the T from the price peak to the centre-post, and this projects the end of the T.
We can see this clearly in the first double bottom of late August- September 2015.
Terry Laundry also pointed out that if you draw the T from the second low this will often project a price low instead of a peak – an Echo Low. (Marked in gray).
Moving on to the more recent 'double' bottom we have some complications. The oscillator shows that there is a cluster of 'lows' prior to the first price low and this is why I have drawn the major T structure in pink. However it is also possible to consider the T structure from a double bottom perspective and this projected to the early October breakdown in the market.
If we draw the T for the second low in gray we can see that at the end of the T the market was already moving downwards – into a low? And notice that the 2 previous arms of the gray T point to, or near to, lows
And so the question is: Are we entering an Echo Low or the beginning of a longer protracted decline?
If this is an Echo Low then we should see some stabilisation over the next few days, perhaps a panic low, in response to the Election and then a Buy Signal.
Of course nothing is ever certain, and there is a possible alternative view – that the Final price low in February 2016 is a single low not a double bottom, in which case we may be looking at longer bearish phase associated with the end of a major T structure.
This is why I use price to confirm the signals and not opinion. Price will get you into the market and ensure that you are not trading against it for very long.
Be prepared.
For more detailed analysis and ongoing analysis of the developments in the S&P500 index on a daily basis, please Sign up for daily Alerts & Observations