Head & Shoulder

We found another chart with a massive Head & Shoulders Top pattern, the U.S. Russell 2000 index (RUT). This pattern joins several international charts warning there is a greater than preferred risk that stock markets are going to experience a collapse later in 2009 or 2010.

Big picture, we found two more charts with a massive Head & Shoulders Top pattern, the U.S. Dow Industrials and the U.S. Russell 2000 index (RUT). Those patterns join several international charts warning there is a greater than preferred risk that stock markets are going to experience a collapse later in 2009 or 2010, perhaps lasting into 2011 or even 2012.

Dow Theory still has a primary degree sell signal. We show that our Primary Trend Indicator and its confirming 20 month / 40 month indicator are also looking for a substantial decline over the next few years. And the long-term Elliott Wave charts are calling for substantially lower stock prices before Grand Supercycle degree wave {IV} down finishes.

This tells us not to trust the rally from March 6th, 2009, that this rally is counter-trend, is a secondary rally within a primary trend decline.

The times are unprecedented. Think about what is going on right now, with little attention from the mainstream media: The U.S. Post Office is in trouble. Read last weekend's newsletter for details on their mess. The 8th largest economy in the world, the state of California, is essentially bankrupt. They now are issuing their own currency, California IOU's, because they do not have enough Dollars to transact business.

Of course, icon General Motors declared bankruptcy, and has been tossed from the Dow 30 Industrial average. Major Wall Street Investment Banking firms Lehman Brothers, Baer Stearns, and Merrill Lynch are either gone or sold in distress. The U.S. government owns AIG and GM. The FDIC closed 7 more banks on Thursday, July 2nd. The Labor Department reported that another 487,000 non-farm payroll jobs were lost in June, and the unemployment rate has risen to 9.5 percent. That figure excludes those unemployed who have given up trying to find a job. There are now 6.8 million people collecting unemployment checks. Do not believe the lie. Another catastrophic leg of this Bear Market that started in October 2007 is yet to come.

Along these fearful lines, this weekend, we present a dangerous pattern that has shown up in the U.S. Russell 2000, a small cap index, and international stock markets, Germany's DAX, Japan's Tokyo NIKK, and Australia's SPASX200. Each has a massive Bearish Head & Shoulders top pattern nearing completion, with downside targets of near zero. These patterns are not yet complete, and not confirmed yet, meaning prices have not fallen from a right shoulder top, below the neckline. If they do get confirmed, it means the probability of the downside targets being met are high.

The NASDAQ 100 rose 4.86 points Friday, closing at 1,419.84. The Russell 2000 rose 1.71 points Friday, closing at 480.98. The HUI Amex Gold Bugs Index fell 0.41 points Friday, closing at 313.89. July Gold fell to 912.2. Silver fell to 12.64, while August Oil fell to 59.66. The Dollar rose 0.37 to 80.24. Bonds rose over a point to 120^23. The VIX fell 0.76 to 29.02.

Shorting should only be done with funds that are speculative and the investor is willing to accept a substantial loss on. That is because the PPT is very active at this time.

Källa: www.technicalindicatorindex.com