A Pennant Is A Jack-In-The-Box

For weeks I've been saying this market was coiling and needed a catalyst.

Both the QQQ and SPY were forming a fierce pennant at the top of the range, which is price squeezing into a tighter and tighter box until it runs out of room. SPY looked like it wanted to break out. The QQQ looked like it wanted to break down.

Neither one of those meant anything.

A pennant is a jack-in-the-box. It's getting ready to squeeze, and that's all it is. It doesn't tell you which way and it doesn't tell you when. You can stare at it all day and it won't answer you until something forces the issue.

So I stopped watching the pattern and started watching what price did at the edge of it.

What I noticed is as SPY was trying to breakout, it wasn't getting that big move and just coasted at the top of its local range.

That coasting is the tell, guys.

Price got to the edge of a squeeze and couldn't generate a move. Nobody was there to take it higher. And it changed the shape of the whole thing, because that created SPY to start forming an ascending triangle, which is a very bearish pattern.

Now look at the other one.

QQQ gapped down yesterday and has been met with another gap down today. Same pattern, same market, and it answered with force instead of coasting.

The pennant was never the signal. What price did at the edge of it was the signal, and my two indexes told me two different things about who is actually showing up.

I still want to know what spooked this market. Sure, markets pull back, but not in the doldrums of summer without a catalyst like the carry trade drama we had a couple years back. This is not a trend with pullbacks. This was a serious halt in the middle of summer, and now we're starting to gap down.

I need to know this catalyst because that is what will dictate the follow through.

But I didn't need to know it to read this morning. The Qs told me which way before anybody told me why.

Now, my Game Plan members got the levels for this before the bell, and they didn't wait around for a headline either. Here's what they posted in the room this morning.

Scott B put up a grand on SPX, then another 2k. gabeoropollo7 was out with $650 and said peace out before 10 o'clock. Gene hit his 100% target on XSP. jazzingcoco went in at 1.68 and out at 2.15.

And mdboothe made his entire Game Plan subscription back in one trade.

All of that before 10:20 in the morning.

So the next time you're staring at a pattern waiting on it to say something, stop. It won't. Go watch what price does when it gets to the edge.

Or come get the levels from me before the open and skip the staring.

If you’re not in Game Plan with us, here’s your chance.

Rock On,

Voz