Wanted to share a pretty reliable price pattern with you. It's called a head and shoulders top and, especially when viewed across longer time frames such as weekly bars, it tends to confirm a trend reversal -- in this case the rally that began in November 2016.
For those trading in the Chaikin Analytics 3 to 6 month time frame sweet spot, I'd caution against aggressively loading up on too many Very Bullish positions if we experience a sharp reversal. After the initial break through the neckline, price throws back and retests old support which then acts as new resistance. We could make it all the way back to 2600 before rolling back over and down, or the bear market rally could be shallow..perhaps up to 2530 (February lows). The way price is acting now, we could hit our downside price target without ever retesting broken support. This is one of those black swan market periods we get about 1% of the time. A head and shoulders is a TREND REVERSAL pattern, which means the stock market could make a series of lower highs and lower lows for an extended period. Until price gets above 2600, I'm bearish. Until price breaks above 2800, I'm no better than neutral. -- Mike
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