“Third Time a Charm” if the 500 index breaks from this pattern?

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500 index created two large bearish rising wedges at (A) which ended up leading to lower prices once support broke in 2000 & 2007.

Once again, the 100% rally off the 2009 lows has brought the 500 index to old resistance line (B), while creating another rising wedge.

This past week a small break below the rising wedge took place at (2). Will the "Third Time be a Charm" and not follow the first two wedges?

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9 Comments

  1. Did you see though how in mid 2007 the wedge broke a first -and short- time before the markets rallied to create a marginally higher high before the final break of the wedge? We’re much farther into the third wedge though, not much space -or time- left…

  2. Hi Chris,
    Do you think the Russell 2000 chart has a “leading” function? The May 2011 highs acted as exact resistance (almost at the same point as the 2007 high) and terminated the last bull market. Does it look like a giant cup & handle? I’d appreciate your thoughts on the Russell 2000.

  3. Good to hear from you Belsha….Great observation!

  4. Al…..I do believe the Russell is VERY important as a leading indicator. For a while it has been our favorite U.S. index to short, due to a cleaner resistance at prior highs. Thanks for your viewership and comment. Chris

  5. Third times a charm or Three strikes and you’re out. I’m still troubled with the lack of broad stock ownership and bearish sentiment (seems hard to have a large sell off here)… Perhaps a Fiscal Cliff Fix provides the last bit of sentiment stimulus needed to create a bull trap and the last 2007 like attempt at a new hight before the power of the pattern takes over.

  6. Al and Chris, if you do a log chart of the Russel 2000, the lower trendline from 2009 has broken cleanly. It had a false breakout at the bottom in June of this year and has a clean break now on a logarithmic line chart. With the resistance points that held up perfectly, it’s created a giant ascending triangle that should break to the upside but it’s not.

  7. Thanks Chris. Does the Russell 2000 look like a Cup & Handle? Is there a bullish angle?

  8. Thanks Drew….great comment and observation. I appreciate you sharing and your viewership

    Chris

  9. Al….with the rising support line broken from the 2009 lows, if this is the handle, it needs to hold right now!

    Keep an eye on the high yield funds Al, if support line (1) is taken out, stocks usually get a good deal weaker. (see high yield “fiscal cliff” here)

    Chris