Powerful reversal signal: Head-and-Shoulders Pattern

Is the market headed for a sudden demise?

  • Current "Head-and-Shoulders" pattern indicates severe weakness.

    Votes: 4 33.3%

  • Current uptrend is gaining strength and still strong.

    Votes: 8 66.7%
  • Total voters
    12
P

paysense

It is one of the most reliable chart patterns, and it reaches its projected target in 95% probability (although last one failed). http://en.wikipedia.org/wiki/Head_and_shoulders_(chart_pattern)

hands.jpg


With volume at anemic levels and the indexes vying for new highs - are we headed for a cratering market?


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This is *still* an innocuous market. Confirmed trends (up and down) reverse sharply without volume or institutional support. Volatility is great for scalping - but most others (long-term systems) need to exercise caution during market uncertainty. Still. . .price RARELY goes far without VOLUME. The way this market is acting, and I do not predict - just follow, I would not be surprised if we get a very large and violent "correction" from here, soon. Meanwhile I have HAD to pare back exposure with 35 point NQ jumps every day!!! Normal? Yes, if you look at this in the perspective that after a Bear Market not seen in 120 years, it will take much volatility to reset leadership and start a new Bull Market. Just another day I suppose (grin).

pay$

FYI - the best way I can look at late-stage Bull, Bear and the current market conditions: continued *frothy* action will make easier gains to the downside and into the next Bull (when this actually arrives).

:cool:
 
Once again. . .I get a LONG signal this morning (lighten my SHORTS and <i>phase into</i> or test going LONG).

I do NOT second guess (not trade) my proven 100% mechanical futures system, but does anyone really think the market can continue to move much higher through overhead resistance (supply where LONGS got stuck during Bear Market that want to get out at near even) or even recent resistance???

pay$

:p
 
Quote from NihabaAshi:

Your chart does not show a confirmed Head & Shoulders pattern via the fact that the right shoulder has not developed.

Mark
More...

Ditto
 
Anyone using Twitter?:

http://twitter.com/hedgefundsguru

For the market to move forward, select sectors/stocks will need to lead us in quickening volume up through resistance. I am seeing many of our past leaders - that did well during the 8 month rally - struggling to move back up through their 50-day MA after the recent heavily-traded plunge. Many are watching the S and P at 1100.gA
 
Quote from NihabaAshi:

Your chart does not show a confirmed Head & Shoulders pattern via the fact that the right shoulder has not developed.

Mark
More...

Exactly.

I trade patterns too, I think they are great, but it's important to understand WHY they are what they are, and why they work. Just looking for an arbitrary shape in the middle of PA (not saying that is what you're doing) will lead to frustration.

With a H&S, price essentially needs to make a lower high, then proceed to break the neckline and make a lower low. At least thats how I look at it.
 
Quote from jonbig04:

Exactly.

I trade patterns too, I think they are great, but it's important to understand WHY they are what they are, and why they work. Just looking for an arbitrary shape in the middle of PA (not saying that is what you're doing) will lead to frustration.

With a H&S, price essentially needs to make a lower high, then proceed to break the neckline and make a lower low. At least thats how I look at it.
More...

Understanding why makes total sense. Does it now appear that having moved to new highs -- the pattern is off the table.

What does anyone think about the Russell 2000, SmallCap 600 and the MidCap 400 indexes? Does NOT hitting new highs bear any weight?

Interestingly, in the recent past I've seen the Nasdaq pull all the other averages up into new highs. This time it was the Dow followed by the NYSE Composite.

I've also seen quite frequently indexes undercut the prior low and then jump to new highs on no volume.

Institutions haven't been really backing this last third of the "rally" - just 3 days of higher (but not average) volume in the last 5 weeks.

:eek:
 
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