The “Power of the Pattern” started highlighting that markets looked very much alike on 5/14 and the global patterns looked like a “Domino/Slippery Slide Effect” should be CLOSE at hand. (see look alike, dominoes and slipper slide)
These global patterns were suggesting that correlation risk, was extremely high and that until the rising wedges were to break to the upside, overall risk exposure should be VERY LOW AT BEST….since there was “NO PLACE TO HIDE” when looking at these key global markets.
Below is an update to the global situation first discussed 90 days ago.
CLICK ON CHART TO ENLARGE
I would describe the 2007/2008 time frame as the “Great Escape” window (See great escape post).
The above 6-pack reflected that correlation risk was sky high 90 days ago…..and it remains sky high!
Investors should not be surprised that people will look to “escape and hide“ from a broad array of investments!!!
If the past (2007/2008) was any kind of guide, protection of capital is the key! Cash, bonds and the Dollar did well then….will it be any different this time around?
Farok….Great question. Markets can tank without a H&S pattern. More declines take place without the pattern taking place.
Two inverse H&S patterns took place in bonds of late. TLT broke the neckline to the upside and look what has been happening.
https://www.kimblechartingsolutions.com/2011/08/using-margin-debt-to-determine-risk-levels-update/
Russell index in 2007 fell 50% with an H&S, due to a massive rising wedge, just like now. A bounce will happen from somewhere.
In 2008 grains headed south with stocks, oil headed south with stocks, CRB headed south with stocks…..we have to be aware that the “great escape” happened once and it can happen again when investors get scared!
https://www.kimblechartingsolutions.com/2011/05/is-a-great-escape-taking-placeabout-to-take-place-in-a-wide-variety-of-assets/
Thanks for your great question and comment,
Chris
Hi Cris, The waterfall chart in 2007 did not have a head and shoulders pattern.Will the current chart cause a similar waterfall or will it kiss the underbelly of the resistance line to give investors another opportunity to short the market.
Andrew… these developments suggest big time capital protection, first and foremost. For those aggressive investors, the breaking of the neckline/support channel does open up a scoring on defense opportunity!
Chris if you hiding behind the pole, we can hide behind you..
I’m sure the fat lady will sing today….in your support..lol.
you suggesting to short?