Are We Seeing the Largest Bearish
Head & Shoulders in 100 Years?

By Chris Kimble of Kimble Charting Solutions
November 9, 2012

 Print Page    Email Article    

Bookmark and Share

Advisor Perspectives welcomes guest contributions. The views presented here do not necessarily represent those of Advisor Perspectives.

The two-pack below suggests that the NYSE Composite and Wilshire 5000 index could be forming one of the largest "Bearish Head & Shoulders" patterns in the past 100 years.

I created this chart for Premium, Sector/Commodity Sentiment and Global Dashboard members a few weeks ago.



I am a believer in the following principle: It's not the odds of something happening that is key; it's the impact if it does!

Pattern analysis is an art, not a science. The odds are low that this pattern will play out as illustrated above. But if the bearish H&S outcome unfolds, the impact would be large. How large? Head & Shoulders topping patterns usually trade at least back down to their necklines, and the necklines in the two-pack are more than 40% below current prices.

A little reminder....I am NOT a Bull nor a Bear. I don't create these patterns (millions of people made these patterns over the past 20 years, not just me). I am simply sharing what the patterns could be suggesting.

I will be very happy to be wrong on this read and will gladly accept the egg on my face. If I end up giving you a good laugh on this analysis, we are ALL WINNERS, because that means the market didn't suffer a large decline. Many investors are already rather bearish at this time (which is often seen from a contrarian perspective as a bullish indicator). Outflows from stock funds has been almost $400 Billion over the past four years (see feature on the outflows here). Maybe those out flows and my focus on the bearish pattern will keep the H&S from taking place! I certainly hope so.

Again, let me emphasize: This is my observation of a pattern... not a prediction!

I detailed this H&S pattern and other similar patterns in a 90-minute workshop a couple of months ago. If you would like to view the full workshop click here.

If you would like to see a free condensed version of the workshop click here.

Technical Footnote: Should we respect the fact that the Dow is at the top of this 70-year channel and is attempting to break support of a rising wedge?




(c) Kimble Charting Solutions





Print Page    Email Article
Remember, if you have a question or comment, send it to .
Website by the Boston Web Company