If you are anything like myself you’ve probably grabbed a coffee, or other beverage of choice and put on some financial show where you could hear the latest “earnings” reports as they came through. Personally I listen to these reports as to just how colorful they’ll be spun. i.e., “Fantastic!”, “Incredible!!”, “Wow, just WOW!!!” and so forth.
The reason the commentary more often than not resembles something akin to a comedy show is because many of these earnings are completely managed before hand, as in either adjusted up or down, on the fly over the course of the cycle, so that if there are any “surprises” they are already knowns. Which by the way is actually required by SEC regulations. But that’s for another article.
The reason I felt compelled to share the following is for the reason of: when I looked at a few charts what I saw was concerning in my opinion. Here’s what I’m alluding to. To wit:
The above is the S&P™ futures, and the bars represent 4-hour intervals as of about 8:15AM ET.
What the above chart shows is what is known in technical analysis as an “ending diagonal.” (and yes, I can read charts with the best of them.) What this pattern represents more often than not is what is also described as a “terminal pattern.” i.e., The trend that preceded it has run out of steam, and is about to reverse.
Could it consolidate further? Sure. Could it move even higher? Of course. Does it portent anything concrete? No, it’s always a statistical odds equation. But, with that said, it is a well-known and defined pattern observed by many as a signal that the “trend” as they say may be about to encounter a pause, or worse.
In my opinion, this is an ominous pattern to develop at the beginning of the earnings season. I would expect to have seen the appearance of this pattern (if it were at all) far more into it, or near the end of the cycle or reporting period. That’s why I was a little startled when I looked at a few other charts and seen the same pattern developing in a myriad of other indexes as I perused them.
Whether or not anything comes of it, is as always, pure speculation. But here’s the thing to remember…
If this is a pattern in the HFT arsenal of pattern recognition programs? It doesn’t matter what you, or I think…
It’s what the machines will think – then do.
© 2017 Mark St.Cyr