Tuesday, 24 February 2009

Chart Perusal: Your source for charts on the stock market and economy

Possible Multi-Decade Head and Shoulders

I found this chart on Ritholtz's The Big Picture blog, and he was mentioning the fact that the 50% retracement from the beginning of the great bull run from 1982 was impressive. At this point, the important thing is what happens going forward. The market rallied impressively today. The DJIA was up 3.32%. The S&P was 4.01%. The NASDAQ was up 3.90%. There isn't a doubt in my mind (even with today's rally and the forthcoming rally that is around the corner) that the indices are going much lower over the coming years. Take a look at the long term chart of Japan. They have been in a bear market for almost 20 years. Every single rally should have been sold over that 19 year period. I think we could see the same type of thing in the U.S. Every time the market rallies, just sell into it. Back to the chart, could it be forming a huge multi-decade head and shoulders pattern? Anybody who thinks the DJIA is going back to 14,000 in the next 3 years might be crazy.

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