Long-Term Chaos Clamshell in the SP500
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Since I discovered the Chaos Clamshell pattern in 1990, I have found it to be a most useful pattern for trading. In it's basic form, it is a 7 move complex zig-zag. It shows up on charts ranging from one minute bar charts, to daily, weekly, and even monthly.
This chart shows the S&P Exchange Traded Fund, SPY since its inception, on a monthly chart. It starts out with moves 1, 2, 3, and 4, forming a base. Move 4 was the Great Recession.
Move 5 is usually the biggest and fastest move. This is true of the SPY which has risen in a ten year super bull market. Now it looks like that bull is dead.
In 2018, the S&P make two distinct tops. It has now make a slightly higher top in 2019. This has formed the pattern traders call "Three drives to a top." It is one of the most reliable patterns signaling the end of a move.
Move 6 and 7 follow move 5. One way to estimate move 6 is to project it as a duplicate of move 2 or 4. That is shown on this chart. It suggests prices in SPY pulling back to 200-220. In the S&P futures, that is 2000-2200.
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