SPDR S&P 500 (SPY)

[Fox13]

Good question, Gleno. Triangles are the darlings of both Elliot and the Hurst people because if you call a correct break out point, when it happens in the expected direction, you are prepared to react fast with all the tools ready to go. I looked at both your triangles. First, the large one (ABC, on my 60min. chart). As suggested by a classic (John Murphy)…“prices should break out in the direction of the prior trend somewhere between two thirds and three quarters of the horizontal width of the triangle“. I think that the red line (1 on my chart) defines a significant prior downtrend, enforced by the impulsive Boxing Day double top. The AC line extended to the left also meets an area of congestion, marked by a rectangle around 01/15/08 where the two fractals and the 34MA describe a bow tie. In my thinking this suggests its technical significance. Finally, if the extremes of the prior downtrend are taken as a standard for building Fib. time ext. lines, it appears that the 38.2% and the 61% verticals fit to Qs price lows while the 100% is close to the apex of the triangle in the future. To Fibonacci fans this suggests that the small triangle that you correctly noticed, is actually imbedded in the large one and uses Fibonacci time/price evolution points derived from the dissection of the large triangle. IF this is true, one might HOPE that the next move will simply follow the rules of geometry, as shown by the dotted green line. Thus, the real action should be in the big triangle which as you suggested, is bearish. We might be close to the point between “two thirds and three quarters of the horizontal width of the triangle”, when the Qs will go DOWN.
Regards, fox