Why did the market not tank in October? Simple. It encountered strong support at the lower horizontal line. From 2010? you say. Indeed. These zones can have influence over years. Magee said once that he had found a support line 13 years long.
Why did the market shy at 1266? Simple. It ran into the formidable resistance embodied, first of all in the neckline of the head-and-shoulders formation (and all it represents) and second at the massive resistance back in 2009 observed by extending that line.
If you’re so smart what’s it going to do next? Sorry, not that smart. ….However….
In October we thought we saw a flag, and calculated that prices could reach 1348. The upper part of that flagpole fizzled, thanks to Sylvio Berlusconi and the fractious Greeks. (News rules. Except when it doesn’t as Yogi Bear remarked)
Now there may be a pennant forming, which is interesting — failed flag, maybe new flag with even more positive implications. This observation is spreading like a meme across the net. You know what a meme is. It’s one of those guys in whiteface who hangs out in Union Square in San Francisco and pretends to be in a glass cage. Until chased away by hordes of accordion players throwing rotten tomatoes.
If it is a pennant — flag — banner –whatever it means that there is an upside above it to equal the downside below it.
But at the moment with the pennant — or triangle — the market is marking time waiting for the Herman Cain of Italy –Sylvio Berlusconi — to resign and go to jail. This is like waiting for Godot.
News will continue to drive the market, but our systems are long and our judgement agrees with them (not always the case).