Further Explanation of C & H Pattern

3 people commented (on another site) yesterday about the Cup & Handle pattern being a basing pattern and that the current situation did not meet that criteria because it was occurring too near the ATH's. My response at that time  was not as thoughtful as it needed to be. An important deeper explanation is that the charts I posted were Stockcharts.com Gallery views which feature a daily chart at the top and a weekly chart beneath it.There is actually a C & H pattern from the daily chart which is embedded, or nested if you will, within the C & H pattern on the weekly chart.
On the weekly chart we can see that the bottom of the cup goes down to the 1810 area and was indeed the result of a steep decline. The upper edge, or lip of the cup, on both sides is not far below the ATH's.  I think most people were looking at the daily chart,on which the whole C & H pattern does take place within about 100 points of the closing ATH. But, in fact the whole C & H pattern on the daily chart forms the developing handle on the weekly chart. On the Gallery view, the weekly C & H looks V-shaped, which is not ideal since the ideal shape has a more rounded bottom forming a U, not a V. I originally called it an inverted  H & S pattern which was mutating into a C & H pattern with an inverted pyramid shaped cup. Below is a Gallery view of the $SPY. Note how the C & H on the daily forms the handle of the C & H on the weekly.

Cup & Handle Patterns Nearing Completion

Many indexes and ETF's look to be completing their cup and handle patterns. When that happens, which could be within a week, there will be upside fireworks. I have posted a Gallery View for each index or ETF.

http://stockcharts.com/freecharts/gallery.html?%24INDU
http://stockcharts.com/freecharts/gallery.html?s=%24SPX
http://stockcharts.com/freecharts/gallery.html?$MID
http://stockcharts.com/freecharts/gallery.html?IWP


As a bull, I feel acutely aware of the possibility of an irregular B corrective wave that surpasses the old all time highs. That is an accepted tenet of standard Elliott Wave Theory,at least as I know it. That may or may not be the case for OEW. Tony is the final authority on that. Possibly it is an OEW principle in the process of mutating. I am not a aware of an RN Elliott or Prechter-Frost defined limit to the height of the B-wave above the previous ATH’s. The farther above the
closing SPX high of 2130 and the intra-day high of 2135 it goes, the less likely it is that the price movement is just a B- Wave. Above a closing high of SPX 2200 is where I would say that the irregular flat corrective wave theory loses 99% of
it’s credibility.