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Black Friday

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...Following on from my article,The Butterfly Effect; and as today is known as Black Friday in the United States then I thought I would call this article the same…the relevance should be become apparent as you read it.  What now follows is a current analysis of key equity markets and why I believe we are heading much lower from todays' current levels.

At the time of writing, the FTSE 100 index in the UK and the Dow 30 and S&P 500 in the US - which are leading world indices - have completed Head & Shoulder patterns on the weekly charts.  Should the stock market falls continue, then within days the charts should post sell signals on the MACD (a widely watched technical indicator) at the weekly level.

A Head & Shoulders pattern is a bearish pattern that signals a potential fall in markets. In addition, the FTSE 100 is now below the key 200 day Moving Average on the weekly chart which is another sell signal and very bearish even though the Dow and S&P 500 have yet to breach that key level on their relative 24 hour trading charts.

Should these patterns play out then they indicate a minimum fall of 20% from current market levels and once the sell signal is triggered on the weekly charts, the fall could take the form of large one day drops or controlled falls, but seeing the current price action of the markets where the FTSE 100 index has fallen for 9 straight days it is leading me to believe that a huge one day sell off could be imminent. I post pictures of these charts for reference (click image to enlarge).


FTSE weekly bar chart, Head and Shoulders formation, 251111.pngFTSE 100 Weekly Bar Chart

 

FTSE MACD weekly H&S, 251111.pngFTSE 100 Weekly MACD

 

Wall Street weekly bar chart, Head and Shoulders Formation, 251111.pngDow Jones Industrial Average Weekly Bar Chart

 

Wall Street MACD weekly MACD, 251111.pngDow Jones Industrial Average Weekly MACD

 

S&P500 weekly bar chart, Head and Shoulders Formation, 251111.pngS&P 500 Weekly Bar Chart

 

S&P500 MACD weekly Head and Shoulders, 251111.pngS&P500 Weekly MACD

These charts are based on 24 hour trading and not on the daily cash charts. Also I am only looking at a selection of technical indicators (some of which I do not discuss in this article) and I must stress that this is purely my opinion and I am not qualified to give financial trading advice. Please read the terms and conditions on my blog for further information.

However, once the neckline on these Head & Shoulder formations is broken (as indicated by the black thick line in the weekly bar chart graphs), only a move higher above the peak of the Head on each index will nullify this bearish pattern, but it is my opinion that this will not happen and next year markets will move significantly lower than their 2008 stock market lows.

By taking a step back to study the bigger (Global) picture and understand the fundamentals, the inevitable conclusion is of this dramatic outcome.

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About this Entry

This page contains a single entry by Isaac Sarayiah published on November 25, 2011 12:57 PM.

Steve Jobs iRIP 1955-2011 was the previous entry in this blog.

The Butterfly Effect is the next entry in this blog.

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