The stock market is developing two chart patterns that all prudent investors should pay attention to. Let’s explore the issue with the help of a chart.
Please click here for an annotated chart of S&P 500 ETF SPY. Somewhat similar conclusions can be drawn from charts of the Dow Jones Industrial Average DJIA, Nasdaq 100 QQQ and small-cap ETF IWM. Please note the following:
• Those who do not like technicals, please click here for the chart of the core Producer Price Index (PPI). For details, please see “The big danger to the stock market is lurking in this chart.”
• Please read the following through the lens of the Core Producer Price Index chart.
• The S&P 500 ETF chart shows three points marked as “top.” Some will look at the two points on the right-hand side and call it a double top. Others will look at all three points and call it a triple top.
• In any case, a double top or a triple top is a bearish pattern.
• The chart shows that the time between three tops is not very long.
• The chart shows that the price excursion from three tops is small, at least as of this writing.
• The foregoing two points make this bearish pattern a low-quality bearish pattern.
• The chart shows a point marked as a “shoulder.”
• The chart shows a point marked as “head.”
• The chart shows a point marked as “possible shoulder.”
• The three points above form an inverse-head-and-shoulders pattern if the market does not go below the head.
• An inverse-head-and-shoulder pattern is a bullish pattern.
• This bullish pattern is also of low quality.
Battle royale
What is the take away from the bullet points above? There are two contradicting patterns — one bullish and one bearish. Both patterns are of low quality.
This means that a battle royale is taking place between bulls and bears, and neither side has an upper hand at this time….Read more at MarketWatch.
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