Mike
04-13-2014, 01:35 PM
I have been staring at the smallish possible topping structure of the NASDAQ. It seems too small. Maybe it is forming a head and shoulders pattern if we get a rally in the near term to form a right shoulder. The left shoulder top was in late January. Even if we complete the H&S pattern and then roll over my expectations would be for a minor drop based on the small top.
Advancing Average True Range tells a different story, possible major top. Certainly the 2000 and 2007 tops had a large topping structures, 2007 top was building for six months before the market decided to dump. Both of these had advancing ATR%. So I looked back in history for something that looks similar to today. 1998 comes to mind. There was a quick steep 33% bear market with a bottom in October 1998. The top was week of July 24, 1998. There was no large topping structure prior to this time but ATR% was in an uptrend. ATR% gave us a warning in 1998 where other factors not so much. 1998 is my current model for the current time: meaning possible sharp drop when it gets started. A short right shoulder was formed in 1998, something I would expect here also.
Below is the chart for the 1998 top.
23424
Advancing Average True Range tells a different story, possible major top. Certainly the 2000 and 2007 tops had a large topping structures, 2007 top was building for six months before the market decided to dump. Both of these had advancing ATR%. So I looked back in history for something that looks similar to today. 1998 comes to mind. There was a quick steep 33% bear market with a bottom in October 1998. The top was week of July 24, 1998. There was no large topping structure prior to this time but ATR% was in an uptrend. ATR% gave us a warning in 1998 where other factors not so much. 1998 is my current model for the current time: meaning possible sharp drop when it gets started. A short right shoulder was formed in 1998, something I would expect here also.
Below is the chart for the 1998 top.
23424