Recent Measured Move Retracements In The S&P 500

With the market continuing its relentless rise off the early October lows, let’s take a look at the four recent “retracements” and note their symmetry in both form and movement… or in other words, let’s compare and note the almost identical similarities in the four recent ‘pullbacks’ against the recent up-current in the S&P 500 and (SPY).

(Click for full-size image)

Off the October 2nd lows of $102 (remember then?), price has increased $8.00 (80 S&P 500 points after a rise off 1,020) to the recent $110 (1,100 in the Index) highs.

It has done so with only four meaningful retracements, all of which are shown above.  The blue lines (trendline tool in TradeStation)  highlights the similarities of all pullbacks, both in shape and size.

For reference, here are the following estimated price and percentage retracements as recorded from high to low:

October 6:  $1.39 (1.31%)
October 13:  $1.32 (1.22%)
October 16:  $1.43 (1.30%)
October 20:  $1.43 (1.30%)

Why is knowing this information important?

First, it clues us in to the current “character” of the market in terms of immediately repeating history, which gives us a reason to look for possible support on any future pullback.

Second, in the event that price retraces deeper than $1.50 on any one swing down, it will tell us that the current character of the market is changing, which could clue us in that we would be looking  for a reversal in trend than one of continuation.

When you pick up on “character shifts” or ‘behavioral’ changes in markets or stocks, then you can sometimes be ahead of the crowd who have become acclimated to the patterns and do not realize that the patterns have changed.

On a separate note, one can also envision an “arc” formation in price by visually connecting the lower and upper price boundaries with two arcs in the same manner you would a trendline.  A break up or down from those two ‘arc’ trendlines (or ‘curved’ trendlines) would be a telling signal of a possible change in current structure/character.

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