Reading the Teas Leaves

Chart readers like to look for patterns. A triangle is a popular formation but a symmetrical triangle leaves one sitting and waiting. The above chart shows the triangle that has formed with the S&P on a daily chart. A similar triangle has formed with all the major averages. A symmetrical triangle is not very predictive but when it breaks it can break big time up or down. This formation represents a market that trades in a tighter and tighter range one each successive day. One way to think about this, is that traders are not willing to take big bets when the market gets close to recent highs or lows. It represents an uncertain, skittish market, but when it breaks everyone will pile on.