Ideas for trading the triangle in S&P500 and equities markets

Here are two examples of how to view the triangle that seems to be manifesting in equities over the past week. There are other things to consider, by the way. For example, I've marked it as a running triangle with the 80.06 low in SPY as part of the triangle. If you believe that the triangle begins to manifest after the low, then the triangle can extend longer (meaning that the "d" and "e" legs would take another day or so).

Also, even if price breaks to the upside as in the second example below, there remain bigger picture questions about what that would mean. There's an Elliott Wave count for the bigger picture in which it would be a high that wouldn't exceed the January 6 highs, and then the markets would roll over and test the November 2008 lows (either very close to that, or under that level). There are also Elliott Wave counts in which the January 6 highs would be exceeded. Which is why I continue to keep an eye on and post the bigger-picture charts in addition to the shorter-term charts like these.

I've labeled this as Elliott Wave, and my default label here refers to that along with Tony Caldaro's Objective Elliott Wave, but these are my points and I don't have any idea whether Tony uses these methods as part of his OEW. I can tell you that in Elliott Wave analysis, each legal of a triangle marks out as an "abc" (three-wave) zigzag. And the legs of this one look like zigzags to me, so I've marked them accordingly on the first of these two charts.

When price comes out of a triangle, the movement is generally sharp. In Elliott Wave terms, if the triangle is in a 4th wave position, the final 5th wave is usually a sharp thrust that then makes way for a strong trend reversal (both the thrust and the trend reversal being very tradable). If the triangle is in a "B" wave position, then a trader will at least want to be trading in the direction of the following "C" wave ... although what happens after that can be a little more challenging, in corrective patterns as we seem to be dealing with currently.

On the idea of the "C" wave up, check out my comments on the second chart below (where price breaks to the upside) - I see that the ideas I marked there about a C-wave going to an intermediate high, look consistent with the ChartsEdge cycle chart for this week. That wasn't planned on my part, but interesting .... IF that's the way it plays out, then ideas about where price goes after that, can come from the ChartsEdge longer-term charts (with their subscription), or from other cycles analysts (like Tim Wood's) or other methods. Including of course Elliott Wave - and here I can note, that not only my own EW and indicator analysis, but also Tony Caldaro's OEW commentaries, show the potential really can go either way.

In all events, especially for traders nimble enough to trade intraday or very quick swing trades when the triangle appears in the hourly-bar charts like this, these ways to view a triangle - and be ready to trade out of it - can really make a difference:



I'm also placing this post into my UBTNB3 site (since this is really a very technical trading analysis) and my "No Bull, No Bear, No Bias" site which is more focused on education. So it can stay there as a trading example tutorial about triangles.