Bearish Rising Wedge In The S&P 500?

By Corey Rosenbloom on April 15, 2009
Is a Bearish Rising Wedge forming in the S&P 500 (^GSPC: 841.50 -17.23 -2.01%)? Let’s turn to a pure price look at the S&P 500 index to see this structure potentially developing.When trying to be bearish in any degree off the March 6th lows, it’s as if the bulls are saying “Rumors of my death have been completely exaggerated,” as any attempt to call a top has been hideously thwarted, so that’s a caveat when reading a bearish rising wedge into the patterns. However, taking a technical purist approach, we do see the clear formation of a rising wedge potential reversal pattern.Also, in Elliott Wave terminology, one could refer to this as an “Ending Diagonal” of sorts (which has the same implications as a bearish rising wedge).

The expectation is that price and momentum is winding down and bulls are giving it ‘one last go’ within narrowing trend channels. We should expect a down-move breakout impulse should sellers/bears push price underneath the lower trendline around 830.Furthermore, unless we have ‘pattern failure,’ then bulls should not be expected to push price outside the upper trend channel at 870 or so.Even stepping aside the larger pattern, just using converging trendline analysis, it seems logical to expect the next ‘play’ to be down to test the lower rising trend line for a test of support (or type of “magnet trade”.Keep watching the simple price structure to see what develops and whether or not bruised bears can wrest control away from drunken bulls.