It's that time of year again. Time again for my yearly video - they take so damned long to put together that I don't think I'm up to more than one a year.

This time you've even got my voice on it (cameo at the end) to completely abide by the posting rules.

Without further ado, here it is and hope you enjoy it!

Could happen, yep.

Thanks for the video, Highrev. Dude, you should be in radio! This is the second long-term bull case with merit that I've seen spelled out recently.

That said, what you're calling a Partial Decline @ 2:45 looks like a Broadening Top to me. Which Bulkowski says (at link), "Like the broadening bottom, the broadening top is a poor performer, especially in a bull market. The break even failure rate is high and the average rise is meager."

Using his "percentage meeting price" target calculations (on the futures), hopefully accurately, is giving me 2204 on the upside and 325 on the downside. Which, either way, "interesting times"...

http://www.thepatternsite.com/bt.html

Just quickly checked in to look at the chart Ponzi_unit posted on the GDOW and almost forgot about this thread. Give me a couple of days to look at this more closely - I'm headed out on vacation starting tomorrow morning and will be literally on the road for a couple of days.

I took the 63% figure from this page http://thepatternsite.com/rabfd.html and I was referring to a partial decline to end the pattern before ultimately heading to a breakout higher (price would continue higher short term to the upper boundary, and then sell-off to a partial decline level, and then move higher again eventually breaking out).

How about that one for performance? 23 out of 23! The worst! These things can go either way, head fakes included, but I personally like the flat top / flat bottom configurations since they have better possibilities of being a little more predictable and breaking to the upside and downside, respectively. Nevertheless, I want to study Bulkowski's data more in depth before putting my foot in my mouth any more than I already have.

Thanks for letting me know you liked the video - positive feedback is important to hear! BTW, what was the other long-term bull case with merit that you've recently seen?

DH. He used a 100 year, but not on a market wrap though, so it's not recorded that I know of.

Jstanley, your theoretical breakout range looks good to me. If we take into account the possibility of head fakes and failed breakouts, there’s ample room for some volatile trading!

As previously commented, these patterns are not reliable when it comes to indicating direction. It’s almost a coin toss, in all cases, be them topping, bottoming, or simple right angle and descending (which also means that the terms topping and bottoming are misnomers in this context since they actually can and do break either way). The only exception is the right angle and ascending (the flat bottomed variety) where the breakout percentage rises to 66% (breakdown lower). As I said in my previous post above, my experience is that the flat topped variety is just as predictable in the inverse, but my data is much less empirical than Bulkowski’s.

The throwback/pullback rate for the different types averages around 50% which means that the probability of getting on board after the breakout is just as high as predicting which way the break will be. The percentage of breakouts meeting price targets is higher with bullish breakouts than bearish, indicating better chances of a successful trade than with the bearish breakdown once a breakout and indication in direction higher takes place. Partial declines and rises happen frequently, and as such can give you an edge once identified since they normally happen in the opposite direction of the eventual breakout.

Bulkowski’s trading recommendation is to “buy when price rebounds off the lower trendline, and short at the top when price heads down.” That works well, of course, with touches 3 and 4, but the 5th reversal is more problematic since it’s often a partial rise or decline.

In essence, it’s a range where breakouts should be faded, that is until a definitive breakout happens like at the end of the 1965-1975 pattern (but there was plenty of time to get on board on that one). Looking for an entry at a partial rise or partial decline level improves the probabilities for a successful trade, and the primary task for doing so would be to identify support confluence levels like moving averages, horizontal S/R, channel S/R, etcetera. I put point “e” on the chart in a possible partial decline position at the 61.8% retrace of a hypothetical move to the top of the pattern from the 2009 lows, which also sits in the middle of a huge horizontal support zone and just above the SPX 1000 figure.

Of course, there’s always the possibility that we’re currently watching a partial rise take place, but you’d have to throw out that EW labeling I put on the chart for that. That possibility wouldn’t conform with the classical broadening pattern definition either, which to my knowledge requires 5 touch points (unlike Bulkowski’s “at least two peaks and two valleys” criteria). Combined with the rest of the technical indicators, S/R levels, trendlines, moving average analysis, cyclical work, Gann angles, etc., I'm inclined to look for another price touch of the upper boundary.

Thanks for motivating me into this more detailed look at that price pattern. It was well worth it!

And now it’s back to my regularly scheduled vacation.

A valuable and interesting perspective. Thanks HighRev.