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Stock Market at the Point of Reversal, Danger of a Flash Crash

Stock-Markets / Financial Crash Jul 02, 2012 - 01:32 PM GMT

By: Anthony_Cherniawski

Stock-Markets

Best Financial Markets Analysis ArticleFXE (125.35) appears to have reached the apex of minor wave 2 on Friday. As spirited and threatening as they appear, short-covering rallies generally don’t have the fuel to make new highs since the new shorts were taken on after the high on June 19. Rallies that are meant to shake out the shorts generally do not involve any investment on behalf of the institutions that engineer them. They are only too glad to buy back the short positions of their hapless victims.


This formation can be viewed as an Orthodox Broadening Top with a “failed” point 5. This raises the prospects of a crash considerably, even before violating the “crash trigger” between 123.25 and 123.50 or the Head & Shoulders neckline at 123.75. This is looking like the real deal again. All of the flash crashes were preceded by a Broadening Top formation in the hourly charts.

SPY (136.35) appears to be making point 5b in its new Orthodox Broadening Top. The final thrust also takes the shape of a Broadening Wedge. SPY is also in a very dangerous position, since the decline after the reversal should occur with spiking volume. In other words, we couls see a free-fall situation develop, since the larger, green Broadening Top has completed point 7.

Tony

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