Safehaven | Symmetry Scenario Gives SP 500 Decline More Room to Run

May 17, 2009

Symmetry Scenario Gives SP 500 Decline More Room to Run
by Mike Paulenoff

Let's say that the symmetry exhibited by the March-May rally with the January-March decline continues into the future. What would the next leg of the S&P 500 look like?

Looking at the e-mini futures chart (which gives us a view ahead of Monday's open on the cash markets), if we decide to take the May high at 929.50 as the end of the upleg from the March low at 662.50 -- which is symmetrical with the January-March decline -- then the current weakness into the 880-878 area represents THE START of a much larger downleg that will mimic the inverse of the November-January price move from 735.25 to 939.50.

That would mean that the e-mini S&P 500 has embarked on a decline into the vicinity of 735 to achieve symmetry within a much larger developing pattern -- after which another massively powerful bull leg will emerge that will leave behind a much larger base pattern from where an extended period of very positive price action could (will) emerge.

If the e-mini S&P opens weaker on Sunday-Monday and sustains beneath the 20 DMA (now at 879.20), then the 'symmetry scenario' will begin to gain added significance in my work. ETF traders might want to keep an eye on the ProShares Ultrashort SPY (NYSE: SDS), who chart is also included below the e-mini S&P chart.

Mike Paulenoff
www.mptrader.com

Mike Paulenoff is author of the MPTrader.com (www.mptrader.com), a real-time diary of his technical analysis and trading alerts on ETFs covering metals, energy, equity indices, currencies, Treasuries, and specific industries and international regions.