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The Bermuda Triangle (Diagonal)

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June S&P Futures

TheBermuda Triangle is a loosely-defined region in the western part of the North Atlantic Ocean where a number of aircraft and ships are said to have disappeared under mysterious circumstances.The Bermuda Diagonal is the name I have given this equally mysterious chart pattern that I am observing in the June S&P futures contract that in my opinion has the potential to send this recent market rebound into the missing persons file. In Elliott Wave terminology I would describe it as an ending diagonal. This type of pattern is a non-impulsive A-B-C sequence in which the final and ending C wave takes on a wedge shape within two converging lines.I spoke of this pattern as being mysterious in nature that is because according to theory only a very small percentage ofendingdiagonals appear in the C waveposition of A-B- C formations. It is unclear if this structure has terminated. There could be another advancing wave to come. If so it will have to stay below 2699 to keep the pattern valid. Currently there is visible multi time-frame momentum divergence. This characteristic is noticeable in many of these patterns. Should the market open lower tomorrow and hold below 2673 it won't look to healthy. Expect further pressure targeting +/- 2663. This is tough spot and will most likely put up a fight. Expect a reaction off this level. We will have to analyze any rebound if it were to play out for structural clues. A violation of 2684.50 will produce more upside action which I'd expect to challenge the 2700 level. Please feel free to contact me at Walsh Trading to discuss my suggested trade strategies to take advantage of this scenario playing out.


John Lunney

Senior Technical Analyst

Walsh Trading

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