Best of the Week
Most Popular
1. TESLA! Cathy Wood ARK Funds Bubble BURSTS! - 12th May 21
2.Stock Market Entering Early Summer Correction Trend Forecast - 10th May 21
3.GOLD GDX, HUI Stocks - Will Paradise Turn into a Dystopia? - 11th May 21
4.Crypto Bubble Bursts! Nicehash Suspends Coinbase Withdrawals, Bitcoin, Ethereum Bear Market Begins - 16th May 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.Cathy Wood Ark Invest Funds Bubble BURSTS! ARKK, ARKG, Tesla Entering Severe Bear Market - 13th May 21
7.Stock Market - Should You Be In Cash Right Now? - 17th May 21
8.Gold to Benefit from Mounting US Debt Pile - 14th May 21
9.Coronavius Covid-19 in Italy in August 2019! - 13th May 21
10.How to Invest in HIGH RISK Tech Stocks for 2021 and Beyond - Part 2 of 2 - 18th May 21
Last 7 days
UK Energy Firms Scamming Customers Out of Their Best Fixed Rate Gas Tariffs - 23rd Sep 21
Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Should School Children be Jabbed with Pfizer Covid-19 Vaccine To Foster Herd Immunity? - UK - 23rd Sep 21
HOW TO SAVE MONEY ON CAR INSURANCE - 23rd Sep 21
Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
Trading Crude Oil ETFs in Foreign Currencies: What to Focus On - 22nd Sep 21
URGENT - Crypto-trader event - 'Bitcoin... back to $65,000?' - 22nd Sep 21
Stock Market Time to Buy the Dip? - 22nd Sep 21
US Dollar Bears Are Fresh Out of Honey Pots - 22nd Sep 21
MetaTrader 5 Features Every Trader Should Know - 22nd Sep 21
Evergrande China's Lehman's Moment, Tip of the Ice Berg in Financial Crisis 2.0 - 21st Sep 21
The Fed Is Playing The Biggest Game Of Chicken In History - 21st Sep 21
Focus on Stock Market Short-term Cycle - 21st Sep 21
Lands End Cornwall In VR360 - UK Holidays, Staycations - 21st Sep 21
Stock Market FOMO Hits September CRASH Brick Wall - Dow Trend Forecast 2021 Review - 20th Sep 21
Two Huge, Overlooked Drains on Global Silver Supplies - 20th Sep 21
Gold gets hammered but Copper fails to seize the moment - 20th Sep 21
New arms race and nuclear risks could spell End to the Asian Century - 20th Sep 21
Stock Market FOMO Hits September Brick Wall - Dow Trend Forecast 2021 Review - 19th Sep 21
Dow Forecasting Neural Nets, Crossing the Rubicon With Three High Risk Chinese Tech Stocks - 18th Sep 21
If Post-1971 Monetary System Is Bad, Why Isn’t Gold Higher? - 18th Sep 21
Stock Market Shaking Off the Taper Blues - 18th Sep 21
So... This Happened! One Crypto Goes From "Little-Known" -to- "Top 10" in 6 Weeks - 18th Sep 21
Why a Financial Markets "Panic" May Be Just Around the Corner - 18th Sep 21
An Update on the End of College… and a New Way to Profit - 16th Sep 21
What Kind of Support and Services Can Your Accountant Provide? Your Main Questions Answered - 16th Sep 21
Consistent performance makes waste a good place to buy stocks - 16th Sep 21
Dow Stock Market Trend Forecasting Neural Nets Pattern Recognition - 15th Sep 21
Eurozone Impact on Gold: The ECB and the Phantom Taper - 15th Sep 21
Fed To Taper into Weakening Economy - 15th Sep 21
Gold Miners: Last of the Summer Wine - 15th Sep 21
How does product development affect a company’s market value? - 15th Sep 21
Types of Investment Property to Become Familiar with - 15th Sep 21
Is This the "Kiss of Death" for the Stocks Bull Market? - 14th Sep 21
Where Are the Stock Market Fireworks? - 14th Sep 21
Play-To-Earn Cryptocurrency Games Gain More and Is Set to Expand - 14th Sep 21
The CashFX TAP Platform - Catering to Bull Investors and Bear Investors Alike - 14th Sep 21
Why every serious investor should be focused on blockchain technology - 13th Sep 21
SPX Base Projection Reached – End of the Line? - 13th Sep 21
There are diverse ways to finance the purchase of a car - 13th Sep 21
6 Tips For Wise Investment - 13th Sep 21 - Mark_Adan

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Broadening Top Megaphone Pattern Predicted Stock Market Crash

Stock-Markets / Stocks Bear Market Jul 25, 2008 - 06:52 PM GMT

By: Robert_McHugh_PhD

Stock-Markets

Diamond Rated - Best Financial Markets Analysis ArticleThe Jaws of Death” - The following chart was shown regularly throughout 2007, as we made the point that stocks, specifically the Dow Industrials, had traced out a huge, ominous, major Broadening Top pattern which suggested a long and sharp plunge would follow.

Here is what we said in the August 2007 expanded weekend issue: “We researched and discovered that almost all the major stock market tops of the past century were marked by a Broadening Top pattern . This pattern, also know as a Megaphone , which also looks like a set of jaws, is uniquely characterized by two mirroring boundary lines. The top boundary line is ascending; the bottom boundary line is descending.


What is amazing is that each boundary line has the same slope , one rising, the other falling. We have the exact same pattern as these 7 other occurrences right now in the Dow Industrials . While the positioning of points c and d vary slightly in each of the 8 patterns, what seems to matter most is the Megaphone boundary lines. That is the key characteristic. Points a, b, and e are positioned similarly in all 8 patterns.

“The lines are formed by simply drawing trend-lines connecting the peaks and connecting the troughs. Each line is formed by connecting at least 2 points . In other words, neither boundary line is manufactured by a biased analyst. Rather, it is formed where the market decided to top and bottom along its path to a major top. What are the odds that the slopes of these trend-lines would be exactly the same? What are the odds that seven of the greatest market tops of the past century in the Dow Industrials would bear the markings of this pattern? This is not random. This is a normal pattern of distribution and market buying/selling psychology that naturally leads to major tops, and subsequent declines ranging from 10 percent to 40 percent over a period from a month to 11 months.

“These patterns were found in 1929, 1957, 1965-66, 1972-73, 1986, 1987, 1998-2000, and now 2004-2007. These were the big-boy tops of the past century. The Jaws of Death pattern. The bad news: This pattern tells us more downside is coming.”

We presented these patterns back in February 2007, warning subscribers that 2004/07 had the same pattern, and we were at great risk of a similar plunge in 2007.

Above we update the same chart as of July 18th, 2008, showing that this pattern has once again proved prescient . We believe the plunge is not over, however a short reprieve for a few weeks has started. This plunge is officially a Bear Market, and is a stock market crash . The Industrials have declined 3,370 points, or 23.7 percent so far, from October 11th, 2007's intraday all-time high of 14,198 to this past Tuesday's 10,827, July 15th 2008. More decline is likely.

What is the point of all this? Technical analysis works, and had one paid attention to this time-tested pattern, a boatload of heartache and financial loss could have been avoided. We got heavy into cash, Treasuries and Gold in late 2007 in our Conservative Investment Portfolio after seeing this pattern. It has paid off nicely for our subscribers. A look at that portfolio is available at the Conservative Portfolio button at www.technicalindicatorindex.com for those of you who are interested.

The following pages show the patterns for the aforementioned plunges.

The current pattern from 2004 to 2008 most closely resembles the 1929 and 1972/73 patterns where point d is slightly above point b . It isn't too far from the 1987 pattern in resemblance either . In each of those past three patterns, points c and d were modest moves, and fairly close in time to points a and b . In all three of these past patterns, the distance from point d to point e is extremely long.

The Master Planner's efforts to avoid the horrendous decline these past three similar Broadening Top patterns produced failed, and unless they get on the stick, more damage is likely.

What can the Master Planners do? We have suggested in the past that merely making liquidity available to Wall Street banking firms and commercial banks is not going to get the job done . The Central Bankers believe that if they merely take care of Wall Street, everything will be okay, as the money trickles down. This time it will not. Why is this time different? Because Main Street is losing the value of their homes, is losing their jobs, is losing their capacity to borrow and spend, has no savings, is not in a position to weather the storm. No, the Master Planners will have to print and hand out money to every household in America to bail this crisis out. The dollar will be sacrificed — that is no longer at issue. Hyperinflation will have to happen to avoid a 1930s style depression. We expect that the Master Planners will recognize this. Our concern is whether or not they will realize the solution soon enough to avoid a whole lot of pain.

We may have to see a “print money, reverse tax” event , where the Fed (or the U.S. Treasury) prints money, then mails a fat check to every household on the tax rolls, substiantially more than the recent tax rebate, which accompished nothing. The dollar will depreciate, however debts — which are sinking this ship — are priced in yesterday's pre-hyperinflation dollars, so the reverse-tax handout can be used by Main Street to payoff debt and get back on their feet. Our guess is the Fed and its partners will take at least a year before they consider this — which is bad news for Main Street.

Go to www.technicalindicatorindex.com and click
On the Free Trial button at the upper right of the home page.
Or, you can grab a great offer, 5 months for $99
By clicking on the Subscribe Today button
At our home page.

  “Jesus said to them, “I am the bread of life; he who comes to Me
shall not hunger, and he who believes in Me shall never thirst.
For I have come down from heaven,
For this is the will of My Father, that everyone who beholds
the Son and believes in Him, may have eternal life;
and I Myself will raise him up on the last day.”

John 6: 35, 38, 40

by Robert McHugh, Ph.D.  
technicalindicatorindex.com

Robert McHugh Ph.D. is President and CEO of Main Line Investors, Inc., a registered investment advisor in the Commonwealth of Pennsylvania, and can be reached at www.technicalindicatorindex.com.

The statements, opinions, buy and sell signals, and analyses presented in this newsletter are provided as a general information and education service only. Opinions, estimates, buy and sell signals, and probabilities expressed herein constitute the judgment of the author as of the date indicated and are subject to change without notice. Nothing contained in this newsletter is intended to be, nor shall it be construed as, investment advice, nor is it to be relied upon in making any investment or other decision. Prior to making any investment decision, you are advised to consult with your broker, investment advisor or other appropriate tax or financial professional to determine the suitability of any investment. Neither Main Line Investors, Inc. nor Robert D. McHugh, Jr., Ph.D. Editor shall be responsible or have any liability for investment decisions based upon, or the results obtained from, the information provided. Copyright 2008, Main Line Investors, Inc. All Rights Reserved.

Robert McHugh, Ph.D Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Comments

Mark
26 Jul 08, 15:19
Economic collapse September/October 2008

Current Events form future trends. It's happened this way before in Capitalist societies before. It's happening all over again in our nation/Empire. Americans are going to be shocked when most of us are living in boxes on the corner of the street. It's about to get BIBLICAL. September to October 2008 is when I believe this whole thing is about to go down.


Post Comment

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