Prior to a historic decline in August, the Wilshire 5000 had created a very ugly “Head & Shoulders” topping pattern. The “Power of the Pattern” was suggesting at the time extreme caution for longs was here and for those willing to short the market the time was at hand (see post here)
Below is an update to how the “Head & Shoulders” topping pattern continues to influence this broad market index.
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The neckline stopped the strong rally and turned the broad market down of late.
The battle between strong support line (1) and the macro influence of the H&S pattern remains at hand. Investors that established NDX 100 and Russell 2000 shorts at resistance, must respect this support line and should keep stops tight.
If the H&S remains in control and can break line (1), the decline woud be sizable!!!
