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Currently the Dow and S&P 500 are very near multi-decade rising channel lines and look to be forming bearish rising wedges.
Forecasting and chart analysis is an art, not a science. Even though rising wedges break to the downside roughly two-thirds of the time, I, nor anyone knows for sure, which direction investors will break these wedge patterns or how far it could fall! Keep in mind this pattern breaks to the upside one-third of the time too!
In my humble opinion the key to this situation is this: It's not the odds of the market breaking to the downside that is important. It's the impact to portfolios if it does!
Keep this in mind: Both the Dow and S&P 500 are nearing long-term channel/resistance lines -- ones that have been in place for decades. If the wedges should happen to break to the downside, the bottom of these rising channels is a large percentage away!
A very easy strategy with this pattern at hand is this: Protect capital (in case a breakdown would take place) and then follow an upside breakout if that is the eventual outcome.
Missing some upside action is a ton better than losing capital!
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