The Dow: Calling A Top That Could be THE Top

Given the way that everyone and their dog makes calls on the major markets, and have so far got it wrong on the bear side over the past 10 years, joining this particularly losing herd does not appear to be sensible. However, after a decade, and given that we are fast approaching the end of the decade – when Crashes tend to happen (1929, 1987, 2008 etc), it seems wise to at least be on guard for cracks in the bull market. In fact, the obvious thing is to wait for the market to tell you, rather you attempting to dictate terms. For example, blaming the bond market, end of QE, EU crisis, trade wars, Donald Trump, Brexit et al. To this day, October 5 2018, they have all been wrong and all the experts have been wrong. But there is always tomorrow to get it right. If only because October is traditionally regarded as Crash month.

DOW

But in this instance, it is not the fundamentals that are dictating a correction for the stock market in general, and the Dow in particular. It is a chart pattern, the Rising Wedge. The end of this week has seen the U.S. benchmark break what is usually a reliable technical formation – largely on the basis of risk / reward, as well as being a sign of persistent selling pressure towards a certain zone. In this case it is 27,000, and 26,618, the January 2018 peak. Below this, and below the floor of the wedge, nominally at 26,600, we have a top in the market. While the bears may be hoping it is THE top, a return towards the 200 day moving average area of 25,000, which seems to be what will happen next does not qualify as a Crash, however tempting it is to call one after a decade long artificially induced bubble.

Author: Zak Mir

Financial commentator, interviewer, technical analyst

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