AA, I continue to be amazed at the lack of respect being paid the failing H&S on the long-term charts. The fact is that the bubble was largely caused by people ignorant of TA, and the unwinding is the result of their subsequent actions.
I keep lining that beauty of a N225 chart up against my SPX charts and just shaking my head. The similarities are absolutely uncanny. If you haven't done it, you ought to. I'll try to find the time to post the comparison, but in a nutshell:
* Gain from neckline to peak is 60% over 36 months on both charts.
* Major correction on the way up at T-24 months both charts
* Two minor corrections in the intervening 24 months both charts
* First neckline probe at around T+10 months
* Neckline failure at around T+22 months
Hell, the H&S measured move even projects to a basing region formed at about T-60 months in both cases.
The vast majority of people that caused the bubble don't see this. Those that do see this are dismissing it as too obvious or otherwise not trading it. (Think about that - this huge, absolutely huge, obvious H&S has failed, and how many people are actually changing their stance based upon it? Maybe a few newsletter writers, but you'd expect every TA person in the world to be all over it.)
We will all look back in late 2004 when the H&S measured move is terminating, and those of us that wiggled ourselves out of perfectly good positions to try and catch fleeting rallies will just shake our heads. Folks, don't miss the forest for the trees. It's no time to be adding shorts heavily, but long-term investors should stay the course - stay sold.
I see the potential for a countertrend rally, but unless the H&S pattern is negated, I will continue with my position trades based upon this long-term chart.
My model will remain the Nikkei collapse until something says it doesn't work.
BC |
