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Will Third Trendline Break Be A Charm? at Trader’s Narrative

On October 9th, as the market dropped into the abyss and then stepped back to form a wide ranging doji candlestick, I quipped that if this wasn’t a bottom, to go find a cave and buy a gun.

After a brief sojourn below the low of that day, the market recovered and is now trying to claw its way back for good. Many are noticing that the S&P 500 has now broken above its downtrend line (two):

trend line break up three times dec 2008

But as you can see in the chart, this isn’t really the first time it has done that during this downturn. In late October, it decisively broke above the downtrend line (one) with a very wide range up day.

Then it gave it all back and more, falling well below its previous swing low. My hunch is that the third time will be the charm (light green three).

If we invert the chart and imagine it has been uptrending, it is easy to notice the familiar pattern of 3 line breaks.

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2 Responses to “Will Third Trendline Break Be A Charm?”  

  1. 1 Senta

    How did you draw the 3rd trend line?

    Interestingly Grantham recently said that 975 is about where he thinks S&P 500 is fairly valued?

  2. 2 Babak

    senta, it is based on my seat o’pants technique (patent pending)

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