"Triangle, triangle on the wall, what are thee telling us about market direction overall?" Neither the lack of European financial integration nor the imminent fall of Gadhafi have jogged the Euro and Brent crude oil futures out of their recent sideways ranges. Perhaps we should view the post August 8 pattern in the e-mini S&P 500 as a triangle pattern too? And, if so, what will that mean?

The vast majority of the time, triangles are trend continuation patterns, which suggests strongly that when the current patterns run their course, all of the enclosed price structures -- including oil and the U.S. Oil Fund ETF (USO) -- should resolve into new downlegs.

With regard to the emini S&P, I am thinking that all of the action off of the Aug 8 (overnight) low at 1077.00 through today is related within a large, wide-ranging but contradictory bearish digestion period attached to the major downleg off the 1373.50 high established on May 2. If such a pattern proves to be unfolding, then we should expect another rally attempt towards 1140/45 and possibly as high as 1160/65 prior to the resumption of intense weakness that presses the index to new lows beneath 1077.

Then again, if the e-SPU shows an inability to lift much at all and cannot even retest this morning's high at 1146.50, then the next downleg could be approaching much more rapidly than anticipated.

By Mike Paulenoff

Mike Paulenoff is author of MPTrader.com (www.mptrader.com), a real-time diary of his technical analysis and trading alerts on ETFs covering metals, energy, equity indices, currencies, Treasuries, and specific industries and international regions.

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