Massive & Ominous Double Top Formation
Published November 18th, 2008 in Technical Analysis Tags: bear market, double top, head shoulder formation, measured move, S&P 500 index, technical analysis.Has anyone else noticed this technical formation? I’m sure many have but I haven’t heard a lot of noise about it.
It is only visible on a very long term chart and boy, it doesn’t look good at all. Double top formations are among the most reliable, which makes this ominous. The sheer size of it is also not good news for the market because a measured move would take the S&P 500 Index (SPX) to … well, let’s just say no one, not even a bear would like to think of a world with the index at that level.
The only consolation I can give myself is that it is reminiscent of the very large head and shoulder formation everyone saw towards the bottom of the last bear market. If you look at the chart you can make it out.
The left shoulder occurred in 1998, the large head from 1999 to 2001 and the right shoulder in 2002. The measured move for that technical formation was also hair raising. But it never actually happened even when it broke below the neckline. It did however, give a lot of doomsday scenario fodder for the perma-bears.
bear market, double top, head shoulder formation, measured move, S&P 500 index, technical analysis
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13 Responses to “Massive & Ominous Double Top Formation”
- 1 Pingback on Nov 20th, 2008 at 6:48 am
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Babak,
“Double top formations are among the most reliable”. Really? Can you pull out ONE scientific or even close to scientific study that says that? I have used many hundreds of information sources during the years, but not once have I seen that being proven.
As youo wrote yourself, “… reminiscent of the very large head and shoulder formation everyone saw towards the bottom of the last bear market”. Sure this isn’t as likely?
Thanks and have a good day!
Hey Johan,
Seems like your betting against a further collapse happening. Don’t bet against it. That wouldn’t be good for your financial or mental health!
Regards and good day!
Can’t stand the suspense … if this is a typical double-top formation where would that leave the S&P at the end of the trend???
Ed, the top was 1550 and the completion line is at 850 (approximately). Which means the measured move is 700 points… which would take us to 100 points on the S&P 500 - back to what you see was the beginning of the bull run in the early 1980’s. Now go get a clean pair of pants.
Ouch. Are you sure the measured move is in absolute terms, not percentage terms? The latter would put the S&P at 466 +/- when it’s over.
Kind of looks like the Freeport CrapMoran 5-year chart. FCX baby.
Ragnar,
“Seems”? Thanks for your concern regarding my health, but I have written no such thing.
However being judgmental will be really disastrous for your financial health!
Ed, yup, this is basic technical analysis.
Yeah, it looks like this a bit : )
I’ve been a technician for years. I do think you nailed the the “Head N Shoulders”. Price patterns have been able to show the mind set of traders for years. The H&S you pointed out just verifies that.
Good call
RT..
I don’t think we should worry about this. After all, no other TA has worked lately.
I see the same type of formation (double head) for DOW also.
For s%P this might take us all the way down to 4k, very scary!