Sand Spring Advisors LLC
Another "Pattern Match" to be Concerned About
November 16, 2003
by, Barclay T. Leib
Please excuse the quality of the two charts below. The bottom one is of 1990 AUD/JPY on a weekly basis. I saved a hard copy of it as it occured, and it does not exist on too many data services today since it transpired some 13 years ago. It had to be scanned from my hard copy.
I saved this chart because while at Goldman Sachs, I spotted AUD/JPY at the time to be a classic triple top with huge downside implications. At my behest, my colleagues and I (trading as a team) went short approximately 20 million aussie near 120, and rode it most of the way down, also buying a tremendous amount of out-of-the-money put option volatility before the real nastiness began.
I present this triple top because I think that it has an uncanny resemblance to what has recently transpired on the 60-minute bar chart of the S&P 500 -- right down to the last faux spike higher. No one expects an equity market crash right now. Most expect a continuation of a "standard" steady recovery into 2004. Volatility is low and sentiment complacent.
Here at Sand Spring, however, we are already short the S&P and watching this potential "pattern match" carefully, and anticipating how it might fit in with the possible daily-bar "pattern match" shown back on October 28th that revolves around a previous topping pattern in USD/CAD. Both pattern matches certainly imply that being short now makes sense -- at least to our eye.
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