Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
Stock Market Up 8 Out of First 9 months - 13th Dec 24
What Does a Strong Sept Mean for the Stock Market? - 13th Dec 24
Is Trump the Most Pro-Stock Market President Ever? - 13th Dec 24
Interest Rates, Unemployment and the SPX - 13th Dec 24
Fed Balance Sheet Continues To Decline - 13th Dec 24
Trump Stocks and Crypto Mania 2025 Incoming as Bitcoin Breaks Above $100k - 8th Dec 24
Gold Price Multiple Confirmations - Are You Ready? - 8th Dec 24
Gold Price Monster Upleg Lives - 8th Dec 24
Stock & Crypto Markets Going into December 2024 - 2nd Dec 24
US Presidential Election Year Stock Market Seasonal Trend - 29th Nov 24
Who controls the past controls the future: who controls the present controls the past - 29th Nov 24
Gold After Trump Wins - 29th Nov 24
The AI Stocks, Housing, Inflation and Bitcoin Crypto Mega-trends - 27th Nov 24
Gold Price Ahead of the Thanksgiving Weekend - 27th Nov 24
Bitcoin Gravy Train Trend Forecast to June 2025 - 24th Nov 24
Stocks, Bitcoin and Crypto Markets Breaking Bad on Donald Trump Pump - 21st Nov 24
Gold Price To Re-Test $2,700 - 21st Nov 24
Stock Market Sentiment Speaks: This Is My Strong Warning To You - 21st Nov 24
Financial Crisis 2025 - This is Going to Shock People! - 21st Nov 24
Dubai Deluge - AI Tech Stocks Earnings Correction Opportunities - 18th Nov 24
Why President Trump Has NO Real Power - Deep State Military Industrial Complex - 8th Nov 24
Social Grant Increases and Serge Belamant Amid South Africa's New Political Landscape - 8th Nov 24
Is Forex Worth It? - 8th Nov 24
Nvidia Numero Uno in Count Down to President Donald Pump Election Victory - 5th Nov 24
Trump or Harris - Who Wins US Presidential Election 2024 Forecast Prediction - 5th Nov 24
Stock Market Brief in Count Down to US Election Result 2024 - 3rd Nov 24
Gold Stocks’ Winter Rally 2024 - 3rd Nov 24
Why Countdown to U.S. Recession is Underway - 3rd Nov 24
Stock Market Trend Forecast to Jan 2025 - 2nd Nov 24
President Donald PUMP Forecast to Win US Presidential Election 2024 - 1st Nov 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Revisiting The Excess Phase Stock Market Peak Pattern

Stock-Markets / Stock Market 2021 Aug 05, 2021 - 12:12 PM GMT

By: Chris_Vermeulen

Stock-Markets

The setup of the Excess Phase peak pattern consists of an exuberant rally to a peak (Phase #1), followed by a moderate price correction that sets up into a sideways flagging pattern (Phase #2).  If the INDU and TRAN continue to move in a sideways flagging formation after recently moving moderately lower, we may start to see a new Excess Phase Peak setup in these two major indexes. This could be a warning of a much bigger breakdown in trends in the near future.

Please take a minute to review our earlier research posts related to the Excess Phase Peak setup (below) and how it related to the current market trend:


INDU MUST RALLY ABOVE $35,300 TO BREAK AWAY FROM EXCESS PHASE PEAK

The Weekly INDU chart, below, highlights the five phases of the Excess Phase Peak formation and also highlights a GREEN “break-away” rally trend that could setup to end any potential Excess Phase Peak formation.  If the markets resume the rally trend and the INDU rallies above $35,300 soon, we would consider this a new “break-away” rally trend – potentially ending the Excess Phase Peak pattern setup.  If the INDU fails to rally above $35,300 and trades within the Phase #2 sideways flag range, then breaks downward, this type of price action would confirm the Phase #3 breakdown price trend that sets up intermediate support and the eventual Phase #4 sideways consolidation.

Remember, the phases of the Excess Phase Peak pattern are fairly easy to identify.

  • Phase #1:  The rally to the ultimate peak level.
  • Phase #2:  The breakdown of that peak level, setting up the initial support level and prompting a sideways price Flag/Pennant price channel.
  • Phase #3:  The breakdown of the #2 sideways price channel leading to a steep decline to intermediate support – which acts as a temporary sideways bottom.
  • Phase #4: The breakdown of the intermediate support level which ultimately leads to the strongest price decline targeting the ultimate bottom in price.
  • Phase #5: Identifying the ultimate bottom/momentum based in price.  This trending phase can last many months (possibly more than 12 months at time), or could be in the form of a deep “V” bottom.

Once the breakdown of the Phase #2 flagging formation is confirmed, we start to look for confirmation of the Phase #3 intermediate support level and the eventual Phase #4 breakdown of that support level.

Be sure to sign up for our free market trend analysis and signals now so you don’t miss our next special report!

If the INDU rallies above the recent all-time highs and breaks-away from the sideways flag ranges, then we would consider that new high as a new bullish price trend – negating the Excess Phase Peak Phase #2 setup completely.  Obviously, any new all-time high/rally could eventually setup another Phase #1 peak and Phase #2 sideways flagging channel at any time in the future.

Near the lower area of this chart, we’ve highlighted the On Balance Volume trend and how it has recently started to trend lower.  We would expect any continued upside price trending to support an increasing OBV level as accumulation takes place in the markets.  Failure to see the OBV level rising as price rises may suggest a “false break-away” in trend.

TRAN MIRRORING EXCESS PHASE PEAK FLAGGING SETUP – WHAT NEXT?

This Weekly Transportation Index chart should appear very similar to the INDU chart (above).  The unique similarities of these two charts, one addressing the Blue Chip US economy and the other addressing future US transportation expectations related to economic activity, suggests traders may be shifting away from a reflation recovery after the FOMC statements last week.  We are starting to see traders/investors reevaluate the capability of the US economy to continue the rally trends as they have since November 2020.  Could this shift in investor sentiment prompt a broader market price setup?  Is it warning of an Excess Phase Peak setup in the making?

Right now, we only have confirmation of a recent all-time high peak and the start of what appears to be a sideways Flagging price channel.  We won’t know if the Excess Phase Peak pattern is truly confirmed until we see how the current sideways Flagging price channel concludes.

If it breaks downward, then we’ll have confirmation of a Phase #3 Excess Phase Peak stage that will alert us that a bigger downside price trend is pending.  If it breaks higher, and takes out $16,175, then we’ll consider this new rally high an end of the current Phase #2 setup and expect prices to continue rallying to new highs.

As we move past Q2:2021, it is important to understand that market price volatility should begin to increase as earnings and forward expectations continue to flood the news wires.  We are only one month into the new quarter and we believe the markets are likely to trend sideways through to the end of the month.

It makes sense to us that the broader markets, and investors, are searching for more clarity and reason to be bullish after such an extended price rally.  Time will tell how this plays out, but one thing is certain: Q2:2021 earnings and forward expectations will likely continue to drive trader/investor sentiment over the next several weeks.  Expect an increase in volatility and some potential surprises.

Consider this message an early warning if the Excess Phase Peak setup continues and confirms the Phase #3 breakdown of the current sideways Flagging setup.

Want to know how our BAN strategy is identifying and ranking various sectors and ETFs for the best possible opportunities for future profits? Please take a minute to learn about my BAN Trader Pro newsletter service and how it can help you identify and trade better sector setups.  My team and I have built this strategy to help us identify the strongest and best trade setups in any market sector.  Every day, we deliver these setups to our subscribers along with the BAN Trader Pro system trades.  You owe it to yourself to see how simple it is to trade 30% to 40% of the time to generate incredible results.

Have a great day!

Chris Vermeulen
www.TheTechnicalTraders.com

Chris Vermeulen has been involved in the markets since 1997 and is the founder of Technical Traders Ltd. He is an internationally recognized technical analyst, trader, and is the author of the book: 7 Steps to Win With Logic

Through years of research, trading and helping individual traders around the world. He learned that many traders have great trading ideas, but they lack one thing, they struggle to execute trades in a systematic way for consistent results. Chris helps educate traders with a three-hour video course that can change your trading results for the better.

His mission is to help his clients boost their trading performance while reducing market exposure and portfolio volatility.

He is a regular speaker on HoweStreet.com, and the FinancialSurvivorNetwork radio shows. Chris was also featured on the cover of AmalgaTrader Magazine, and contributes articles to several leading financial hubs like MarketOracle.co.uk

Disclaimer: Nothing in this report should be construed as a solicitation to buy or sell any securities mentioned. Technical Traders Ltd., its owners and the author of this report are not registered broker-dealers or financial advisors. Before investing in any securities, you should consult with your financial advisor and a registered broker-dealer. Never make an investment based solely on what you read in an online or printed report, including this report, especially if the investment involves a small, thinly-traded company that isn’t well known. Technical Traders Ltd. and the author of this report has been paid by Cardiff Energy Corp. In addition, the author owns shares of Cardiff Energy Corp. and would also benefit from volume and price appreciation of its stock. The information provided here within should not be construed as a financial analysis but rather as an advertisement. The author’s views and opinions regarding the companies featured in reports are his own views and are based on information that he has researched independently and has received, which the author assumes to be reliable. Technical Traders Ltd. and the author of this report do not guarantee the accuracy, completeness, or usefulness of any content of this report, nor its fitness for any particular purpose. Lastly, the author does not guarantee that any of the companies mentioned in the reports will perform as expected, and any comparisons made to other companies may not be valid or come into effect.

Chris Vermeulen Archive

© 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