Most Popular
1. Banking Crisis is Stocks Bull Market Buying Opportunity - Nadeem_Walayat
2.The Crypto Signal for the Precious Metals Market - P_Radomski_CFA
3. One Possible Outcome to a New World Order - Raymond_Matison
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
5. Apple AAPL Stock Trend and Earnings Analysis - Nadeem_Walayat
6.AI, Stocks, and Gold Stocks – Connected After All - P_Radomski_CFA
7.Stock Market CHEAT SHEET - - Nadeem_Walayat
8.US Debt Ceiling Crisis Smoke and Mirrors Circus - Nadeem_Walayat
9.Silver Price May Explode - Avi_Gilburt
10.More US Banks Could Collapse -- A Lot More- EWI
Last 7 days
Stock Market Volatility (VIX) - 25th Mar 24
Stock Market Investor Sentiment - 25th Mar 24
The Federal Reserve Didn't Do Anything But It Had Plenty to Say - 25th Mar 24
Stock Market Breadth - 24th Mar 24
Stock Market Margin Debt Indicator - 24th Mar 24
It’s Easy to Scream Stocks Bubble! - 24th Mar 24
Stocks: What to Make of All This Insider Selling- 24th Mar 24
Money Supply Continues To Fall, Economy Worsens – Investors Don’t Care - 24th Mar 24
Get an Edge in the Crypto Market with Order Flow - 24th Mar 24
US Presidential Election Cycle and Recessions - 18th Mar 24
US Recession Already Happened in 2022! - 18th Mar 24
AI can now remember everything you say - 18th Mar 24
Bitcoin Crypto Mania 2024 - MicroStrategy MSTR Blow off Top! - 14th Mar 24
Bitcoin Gravy Train Trend Forecast 2024 - 11th Mar 24
Gold and the Long-Term Inflation Cycle - 11th Mar 24
Fed’s Next Intertest Rate Move might not align with popular consensus - 11th Mar 24
Two Reasons The Fed Manipulates Interest Rates - 11th Mar 24
US Dollar Trend 2024 - 9th Mar 2024
The Bond Trade and Interest Rates - 9th Mar 2024
Investors Don’t Believe the Gold Rally, Still Prefer General Stocks - 9th Mar 2024
Paper Gold Vs. Real Gold: It's Important to Know the Difference - 9th Mar 2024
Stocks: What This "Record Extreme" Indicator May Be Signaling - 9th Mar 2024
My 3 Favorite Trade Setups - Elliott Wave Course - 9th Mar 2024
Bitcoin Crypto Bubble Mania! - 4th Mar 2024
US Interest Rates - When WIll the Fed Pivot - 1st Mar 2024
S&P Stock Market Real Earnings Yield - 29th Feb 2024
US Unemployment is a Fake Statistic - 29th Feb 2024
U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - 29th Feb 2024
What a Breakdown in Silver Mining Stocks! What an Opportunity! - 29th Feb 2024
Why AI will Soon become SA - Synthetic Intelligence - The Machine Learning Megatrend - 29th Feb 2024
Keep Calm and Carry on Buying Quantum AI Tech Stocks - 19th Feb 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Stock Market and Dollar Upward Wedge Patterns - Signs of the times

Stock-Markets / CRB Index Jul 02, 2009 - 05:34 AM GMT

By: Garry_Abeshouse

Stock-Markets

Best Financial Markets Analysis ArticleOver the last 12 months, the USD and now US equities, have formed bearish upward wedge formations on the charts. Upward wedges are usually well defined patterns showing weakening upward momentum, hence the shape. These patterns are known to be very common in stocks during bear markets and were especially so during the period 1929 to 1932.


They are also associated with declining volume profiles – see chart examples below.

Technically speaking, roughly comparable bullish rallies to now, were experienced in the Australian mining market between the second half of 1971 and the end of 1972, in the USA on the Dow in 1930 and the on Nasdaq 100 during the Tech Bust in 2001. By saying, this I do not suggest that future moves will exactly replicate past ones. But what I do suggest is that as before, once the uptrends of these wedges are broken, there is a high probability that if lows are successfully tested, the bear market will resume.

US composite indexes are currently testing important resistance areas and trend lines and I expect that the persistence of these upward wedge formations now, as in the past, will be a continuing sign that the Bear is still strong. The rally has not given a proper sell signal yet and is still trying to squeeze as much as possible out of the rise.

Robert Edwards and John Magee wrote the first (and still one of the best) major text books on Technical Analysis. This book, “Technical Analysis of Stock Trends”, was based upon their experiences in the US stock market from the late 1920’s to 1950 and beyond.

They observed more charts during protracted bear markets than anyone since – due to the fact that since 1942 the US has been in bull mode most of the time. Most of the bearish patterns displayed in this book are from the period 1929 to 1947 – and is one reason why this book is unique.

This is what Edwards and Magee had to say (in part) about Upward Wedge chart patterns as they appear on Bar charts:
“In a Rising Wedge there is no evident barrier to supply to be vaulted, but rather a gradual petering out of investment interest. Prices advance, but each new up wave is feebler than the last. Finally demand fails entirely and the trend reverses. Thus a Rising Wedge typifies a situation which is growing progressively weaker in the technical sense. The converging boundary lines focus on a point near where the advance will halt and reaction set in.”

“Trading volume in a Wedge tends to diminish gradually as prices move up towards the apex of the Wedge.”

“Most true Wedges are too short lived (seldom longer than 3 months) to take on recognizable definition on a monthly chart, but they may be spotted on (dailies and) weeklies.”

“As a final note, we might add that the rising wedge is quite a characteristic pattern for Bear Market rallies. It is so typical in fact, that frequent appearance of Wedges at a time when, after an extensive decline, there is some question as to whether a new Bull trend is in the making, may be taken as evidence that the Primary (Bear) trend is still down.”

Below you will find charts all showing very well defined Upward Wedge chart patterns. They are so prevalent at the moment I feel they cannot be ignored.
On June 8th in one of my newsletters, I illustrated charts showing more than 50 of these patterns. As far as I know no one has ever done a technical study like this before, showing so many charts with the same pattern at possibly such a highly critical turning point in the market.

In this Charting Perspective I have included 21 of these charts, updated to July 1st 2009. They are all dailies, in no particular order and apart from a couple of resistance line additions have not been altered.

Garry Abeshouse
Technical Analyst.
Sydney
Australia

garrya@bigpond.net.au

I have been practicing Technical Analysis since 1969, learning the hard way during the Australian Mining Boom. I was Head Chartist with Bain & Co, (now Deutsch Bank)in the mid 1970's and am now working freelance. I am currently writing a series of articles for the international "Your Trading Edge" magazine entitled "Market Cycles and Technical Analysis".

I have always specialised in medium to long term market strategies and after discovering the excellent Point & Figure Charts from Stockcharts.com in mid 2008, have concentrated on this style of charting ever since.


© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in