Interesting Patterns Unfold

By: J.D. Rosendahl | Sun, Apr 18, 2010
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The markets are making some interesting patterns worth watching. First is the daily chart of the NYSE below, which reflects a potential candlestick pattern known as an "Evening Star".

NYSE Composite Index

The Evening Star is a 3 day topping pattern found at the end of a move higher. In conjunction with the pattern the MACD is about to roll over, and the RSI has turned down from over bought levels. There's enough technical data to indicate at least a short term top. The only thing needed from this point is follow through downward to confirm.

This topping pattern might just roll over the weekly MACD from vaulted levels and provide a clue that a more serious correction may be at hand.

Below is the daily chart of the 30 year Treasury Bond market. The bond market is trying to bounce off the 114-115 level, which is very significant support on the daily, weekly and monthly charts.

30-Year US Treasury

You'll notice the bond market made a small inverted head and shoulders bottom towards the end of December 2009. That bottom and move higher occurred just before the stock markets made a top in early January 2010. The lag time between those two markets was about a week.

The bond market once again is looking to make a bottoming pattern, possibly another inverted head and shoulders pattern with a bottom or head in early April 2010. Once again, the bond market bottom seems to be leading a potential top in the stock market.

I've been blogging recently about my expectation for some kind of top in the stock market by the end of March or April 2010. Turns in the bond market provide an interesting clue worth watching, and technical's on the stock market seem to confirm a correction is pending, and might just confirm my timing.

Hope all is well.



Author: J.D. Rosendahl

J.D. Rosendahl

J.D. Rosendahl is not a registered advisor and does not give investment advice. His comments are an expression of opinion only and should not be construed in any manner whatsoever as recommendations to buy or sell a stock, option, future, bond, commodity or any other financial instrument at any time. While he believes his statements to be true, they always depend on the reliability of his own credible sources. Of course, we recommend that you consult with a qualified investment advisor, one licensed by appropriate regulatory agencies in your legal jurisdiction, before making any investment decisions, and barring that, we encourage you confirm the facts on your own before making important investment commitments.

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