Long Poles and the long view…

Posted on Jan 31, 2014 by in Letters

Recently we referenced the PnF chart for the S&P which advertised a high price objective for the index.  We noted that  the chart pattern also included a "long pole (or high pole)  warning".  A long pole warning is a pattern which occurs in PnF charts which warns of  near term weakness.  Briefly, in the chart a series of higher prices causes a string of advancing Xs.  This advance is revealed as an overbought move when the column is followed immediately by a series of Os which takes back the price advance.  The reader can easily relate this chart pattern to recent events in the market -- prices advance to 1800 stall there (which, note, causes no entries on the chart) and then fall out of bed over the last several days.  And indeed this high pole warning  is now borne out by the breaking of the short term trendline and the threatening of the long term trendline from Nov '12.

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