The Big Squeeze ... Which pattern is going to prove correct?

By: Marty Chenard | Wed, Feb 2, 2011
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The Big Squeeze ... Which pattern is going to prove correct?

Over time on this pattern, the resistance and support lines converge. If carried through to the end, there would be a point where the two would have an equal and offsetting amount of pressure where exact equilibrium occurs.

The stock market only exists because there is never really a condition of exact equilibrium occurring. It is the differential from an equilibrium level, that gives the market the necessary driving force to move up or down. If the stock market existed in a state of continuous and perfect equilibrium, then market prices would be the exact same day after day after day.

So, just like toothpaste would get blasted out of a container because of the pressure increasing from both sides, the VIX pattern shown below will come to the same conclusion. The apex on this model appears to be in early April, but the breakout could occur this month. BUT ... there is also a different pattern to consider as seen below ...

Image 1

But ... are we sure the breakout will be to the upside as it appears?

First, it only appears that it will be to the upside because of the support line we drew on the above pattern. The fact is that there is another pattern possibility we must consider if we go back further in time to the year 2002.

That particular chart is below, and it shows a much lower support than the 9 month support line shown above which comes in at 15.23. In fact, the longer term support comes in at 9.39 which was established in December of 2006.

If you look at the very last chart on this page, you can see that with the lower support, another pattern possibility shows up. If this turns out to be the correct pattern, then the VIX will fall below the 15.23 level and continue down lower with the market continuing its Bull market journey.

Which pattern will prevail and become the correct pattern?

You will know by watching what happens to the first pattern. If the first pattern breaks to the upside, then the first pattern will be correct. However, if the first pattern breaks to the downside, then the second pattern will be the valid pattern.

 


 

Marty Chenard

Author: Marty Chenard

Marty Chenard
StockTiming.com
Asheville, NC 28805
Tel: 828-296-1200

Marty Chenard is an Advanced Stock Market Technical Analyst that has developed his own proprietary analytical tools and stock market models. As a result, he was out of the market two weeks before the 1987 Crash in the most recent Bear Market he faxed his Members in March 2000 telling them all to SELL. He is an advanced technical analyst and not an investment advisor, nor a securities broker.

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