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Cup and handle in making?

As expected, the market topped in a parabolic run-up a few days ago and retreated.

It is possibly creating a cup and handle formation and if completed and correct, we may expect another leg up:
 

S&P 500
 

Cup and handle and all charting is not an exact science. But if we take into account what an ideal cup and handle looks like, or should look like, the market is currently behaving to confirm this pattern.

When we create a cup, the handle should be about 30% of the rally from the bottom of the cup. So, if we agree on the bottom to be at 3230 level (again, not an exact science), and the top of the cup at 3550, then 30% of this rally is 96 points (3550 – 3230 = 320 * 0.30 = 96). Subtract 96 from 3550 and you get 3454 level.

Today, the market dropped to the 3440 level and bounced back up. If this level holds and the market starts going higher, we can conclude that we had a successful cup and handle formation and we would go higher from here.
 





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