When I was a child watching the original Twilight Zones, Hitchcock, etc., 2014 was considered a futuristic realm, yet here we are.
The U.S. markets continued to make higher highs in 2012 with many thinking, “It just can’t keep going up.” It’s been a bull’s delight and a bear’s frustration. Harmonic pattern traders have seen bearish patterns complete and have minimal retracement, which is always a clue of upside continuation, or invalidation of bearish patterns. As stated before, sometimes harmonic pattern PRZ’s (Potential Reversal Zones) are merely targets en route to bigger higher levels.
Today I was asked to give my view on how 2013 would close and the projections of 2014. I’m the type of trader that says “IF price does this, THEN such and such is the target.” I evolved into this type of a mind frame after the market humbled me, sometimes violently, for having predictions. Failure to have bias liquidity in the markets can lead to stubbornness, which can domino into revenge trading (getting in a trade with the mindset of “I’ll show you”), fantasy trading (wishing a scenario wasn’t true), or white flag trading (the attitude of “I give up and don’t care, so I will let a trade turn into a huge loss rather than honoring a stop loss”).
Back to the opinions I have of the S&P 500 for 2014. My opinions are not based on the economy, politics or world news, they are based off the chart’s technical analysis. I just interpret what I see in the price action and the symmetry, and here’s what I conclude.
Now this magnet of 1916 to 1917 is still inside the bearish PRZ on the monthly timeframe, so this confluence of resistance shown on the daily chart could prevent price from testing the extreme of the monthly PRZ target of 1923.44.
However, let’s not rule out the possibility of price completing the monthly target of 2138 for a harmonic pattern completion, whether it be a walk along the pitchfork resistance line or a break above it. Simply put, a hold above 1923.44 has the upside target of 2138 and that confluence resistance test on the daily chart was merely a stepping stone to a higher plateau. Keep in mind also that the stronger a confluence is at a level, the higher the probability of its being a rejection point, and when it’s not rejected, then the break of it is that much more impressive.
A hold below 1846.50 implies a test of the bottom of the PRZ at 1837.50; a break down there implies an attempt to go into retracement mode with the ideal minimum retracement target at 1811.25. The stronger the reversal pattern is, the more it will retrace — really strong reversal patterns like to retrace 100% or more. A 100% retracement would take price back to 1754.
What will 2014 bring? I’ll be watching the IFs and THENs. Here’s wishing you the best of the new year and that you’re on the right side of the trade more often than not!