Google creates topping pattern like 2007, same results again?

joefridaygooglereversalpatternmarketpeakjuly24

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Google rallied strongly from 2005 until 2007, gaining over 100% in this short time frame. In 2007, it created a reversal pattern (bearish wick) at (1), which ended up being an important high. After that reversal pattern, Google and the S&P 500 were both cut in half.

Of late Googles strong move higher last week, following their earnings report, pushed it to a long-term resistance line and a Fibonacci 161% extension level at (2). As it was hitting the dual resistance, it created a reversal pattern (bearish wick), similar to what it did back in 2007.

Any other key assets acting they did in 2007?

Doc Copper is often viewed as a leading indicator for the global economy. Below is a long-term update on the price action of Copper

copperbreaking13yrsuuportjuly24CLICK ON CHART TO ENLARGE

Copper broke a 4-year support line in 2007 at (1) and fell almost 75% during the financial crisis. Of late Copper has fallen over 20% in the past couple of months and is breaking a 13-year support line at (2). Is Doc Copper sending a key message about the state of the global economy?

Google and Copper broke key support in 2007 and both fell hard, as did the S&P 500 and markets around the world.

Joe Friday, just the facts.…If Google and Copper would happen to head sharply south together, they could be sending a message that investors might want to pay close attention too!

 

 

 

Why Dow 18,190 is a key breakout level

dowknockingonfib161doorjuly23
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For the Dow, two of the most impactful prices over the past 15-years happens to be the 2007 highs and 2009 lows. Could those two dates have an impact on the Dow in 2015? The Power of the Pattern would say yes!

If one applies Fibonacci levels to these key dates a Fib 161% extension level is created at the 18,190 level. This becomes a breakout/resistance zone for the Dow.

The Dow closed at 18,132 in February, 58 points shy, a 3rd of a percent away from the 161% level and has since backed off a little bit. For the majority of the year the Dow has been knocking on the door attempting to breakout above this price zone.

I believe we are all aware that the Dow just represents 30 stocks and its not great tool to measure the broad markets. Keep this in mind, if one applies Fibonacci to the same price points in the S& 500 has been knocking on the same 161% extension level, which has held it in check as well.

Will the Dow and S&P be able to knock the 161% door down and push higher? A breakout for both would be viewed as a positive event, so stay tuned to see it they can push past these key levels.

 

Triple Tops or Triple Breakouts? Don’t see this often!

valuelineftsetripletopjuly17CLICK ON CHART TO ENLARGE

I shared this chart with members last week, taking a long-term look at one index in the states and one from Europe, that both look a ton alike!

This 2-packs at the Valu-Line Geometric index and the FTSE-100 from London. Both hit highs in 2000 and then proceeded to fall around 50% each in the 2002-2003 window. Then they rallied back into the 2007 time frame, reaching the 2000 levels, where the both peaked again, followed by another 50% decline.

Since the 2009 lows, each has rallied back and each is now testing the 2000/2007 highs again.

To me, this is a good example of correlation these days on a global basis, reflecting that correlation is pretty darn high.  The challenge with correlation these days is…say we own 100 stocks or numerous indices around the world, thinking we are diversified. If they all move together, do we have a diversified portfolio or basically one giant holding?

Humbly I believe we live in risky times, not due to the chart above though. The high degree of correlation raises risks for all of us.

Will it be different the third time and each breaks resistance? Sure could as the trend is up and each are above long-term moving averages. Should a breakout take place here by one of them, the other could follow along with other key indices that have been stuck at breakout levels since the first of this year!

Few investors are bullish at this time and if a breakout would happen, it would catch a good percentage of investors by surprise. This chart from Ryan Detrick reflects AAII bullish levels that were last hit at the 2003 & 2009 market lows.

aaiifewbullsjuly17

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The stock/bond ratio also finds itself at key breakout/resistance test levels at the same time!stockbondratiodoubletopjuly7

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Several markets from around the world have paused at key price levels, so far acting as resistance. How they handle this could tell us a ton about where markets will be at the end of this year!