Head & Shoulders Top Completed
Principles of the Stock Market

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Have You Seen This?

Have You Seen This?

1.        Head & Shoulders Tops In Place.  The last three weeks of declines completed bearish Head & Shoulders Tops in the key averages, named the Dow, S&P and Nasdaq.  Many will dispute my interpretation because they use intraday lows instead of closing lows.  If one uses intraday lows, the August 16th extremes still hold sway.  And I can easily see their point.  Especially when we’re possibly still in a volatile, 10% rectangular trading range.  In sideways trading ranges, there can be numerous spikes up or down which take us outside the range for a short time.  But still, I haven’t noted any major discrepancies between closing prices and intraday prices in the past so I have to assume, for now, that the old lows DID NOT hold.  We’ll soon see what develops but in the meantime, I see long term completed H&S tops in all three key averages.   The July highs being the first or right shoulder, the October highs being the head and the December highs being the second of left shoulder.  And finally the new lows in January being the neckline breaking.  Schwartz View:  The H&S downside counts are roughly Dow 11,800, S&P 1300 and Nasdaq 2200.  These downside targets aren’t going to be reached in a week or month.  They are longer term targets.  And the pain could end up being much worse as these targets are what’s called minimum downsides.  For example, compare these downsides with yesterday’s 50% retracement (of the whole five year bull market) downside targets I posted.  They are lower still.  Again, the idea is to take protective action here and now, not start worrying about the ultimate downside.

Posted 01-15-2008 1:11 PM by Richard Schwartz