The Bullish Big W Pattern in the S&P 500: $SPY $SSO $SPX

March 12, 2021, 13:56 pm ET, BY Thomas H. Kee Jr- Editor, Stock Traders Daily| Editor: Thomas H. Kee Jr. (Follow on LinkedIn)

Stock Traders Daily provides Market Analysis to entitled subscribers that is designed to help them navigate all market conditions, both good and bad.  This practice started at the peak of the Internet Bubble, and it has been refined over the past 20 years.

This current example is a BIG – W Pattern

Importantly, the tools that Stock Traders Daily provides, including its Tail Risk Hedge Model (Evitar Corte) have helped investors sidestep every market crash since the turn of the century, including last year’s Corona Crash, but during the declines over the past few weeks this leading indicator was NOT flashing signs that a crash was imminent.

Obviously, declines were aggressive, especially in tech, and risk controls were implemented during the down phase, but then bullish indicators started to surface.  This piece is about the identification of those bullish indicators.

Our focus was, and usually is, on the S&P 500 (INDEX: SPX).  This market encompasses tech (NDX) and the bigger value plays in the Dow Jones Industrial Average, so it helps us avoid extremes that might exist in one market or the other.  During these recent market declines, the S&P 500 fell hard too, but at the lows it was also testing the T2 Fibonacci Support level offered by our Fibonacci Calculator.

Our Fibonacci Calculator has been adapted to the Stock Market, and Stock Traders Daily has been using this simple, yet highly effective natural growth observation to define major pivot points in market direction.  Prior to the Corona Crash, this calculator had the two best trading calls in history, if the definition was based on the magnitude and timing of the move in the market that immediately followed the trigger.  For example, the DJIA had its biggest single point gain in history at the time (1000 points) immediately after our Fibonacci Calculator offered a trigger based on a test of support.

During the recent market decline, Fibonacci was the first indicator, when the T2 Fibonacci support level offered by our Calculator was tested.  From there, the S&P 500 began a cycle that resulted in the BIG – W Pattern illustrated below.

A picture speaks a thousand words, and on March 5^th, after substantial market turmoil, Stock Traders Daily offered the BIG – W Pattern to its subscribers.  This was done ahead of time, as a precursor to upside follow through.  In that March 5^th illustration, a green dashed line was projected to show the upside potential associated with that developing pattern. 

The second chart shows what actually happened, and it was almost exactly in line with the BIG-W projection from the March 5^th observatiion.

Anyone who followed the observation offered on March 5^th realized a 4% appreciation using a directly correlated ETF like SPDR Trust (NYSEARCA: SPY), or 8% using a 2x ETF like Proshares ULTRA S&P 500 ETF (NYSEARCA: SSO).  We prefer directly correlated instruments like these because they do not have the idiosyncrasies associated with individual stocks.

Furthermore, there were a number of technical indicators that surfaced near the market’s highs too.  The completion of the BIG-W Pattern was one, a test of T2 Fibonacci resistance existed too, and there was also an overbought indicator from our Sentiment Table.

Everything considered, the risk mitigation on the way down, and the bullish indicators on the way up, were exceptional, and offer a great example of how Stock Traders Daily adds significant value to its subscribers.  Anyone interested in these types of opportunities and tools can subscribe.

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