Pattern context

Over the last week or two many folks have noticed the trend of higher lows and the flat ceiling on the S&P 500 futures.  Chartists call it an ascending triangle.

What nobody tells you about patterns is it's the context of the pattern's environment that tells us as much about what we need know as anything.

Here's a look at the recent action in the S&P 500 futures.

They call the ascending triangle a continuation pattern.  That's because they are most reliable in the middle of an uptrend.  Obviously, that's not the case of the last few weeks price action.  Try to think of it tactically.

No matter how you cut it, bulls get more impatient in the market and keep buying at higher lows while sellers sell at a certain level.

It's all about the underlying trend and psychology  When we're in a larger downtrend, shorts set up camp at a certain level they like.  People see that and know about when to stop pushing their luck.  The bulls get exuberant and bears pull the rug.

When we're in a larger uptrend, bulls are driving the boat and folks simply aren't long enough as prices keep moving higher.

Trade 'em well!