Head and shoulders horror

I know we’ve had a bad day on the sharemarket and I’m no doubt doing a bit of data mining as a result. But I’ve noticed a rather nasty sequence of head and shoulders patterns forming on the S&P500.

First, the 1 year chart:

That’s a beauty isn’t it? We reported it last week and so far the break of the neckline has delivered spectacularly.

Next the 5 year:

This one is obviously more a potential H&S formation, but it’s a nice set up nonetheless.

Finally, we come to the horror, the 25 year:

Now that’s enough to make Mr Kurtz roll over in anguish.

Houses and Holes
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  1. The 25 year chart is scary, are we really falling to the same levels of the early 80’s? Actually that doesn’t suprise as the dillemas unearthed in the late 70’s early 80’s have never been addressed such as endemic structural unemployment and unequal wealth distribution only put off with housing bubbles, financial gambling and to a small degree increased commodities prices.

  2. Didn’t The Prince point you to his and my favourite trader Peter L Brandt’s blog?

    Mr Brandt mentioned all those patterns a couple of week’s back:


    He’s expanded on the topic in more recent posts.

    I spotted the potential long term H and S back in April, though at the time I didn’t really believe my eyes:


  3. “What beautiful fractal self similarity you have” said the wolf
    to little red riding hood.

      • Hehehe. I went for a bike ride at 1650 (50km) feeling mighty good and when I got in qt 1830 I went apoplectic at the naked thievery of the ECB supporting their banking masters.

        Italy and Spain has a debt problem…soooo we’ll lend them more money so their banks can get a boost. No money to the austerity ‘victims’.

        From the highs of the ride (I was going to have a Hoegaarden and a Cuban) I went spare. These bastard need arresting.

        A couple of reds and lets make the bastards pay [me].

        BTW thanks for getting me trend trading after so long of doing ‘swing’ (Maths is my degree) on ‘normal’ markets and fine tuned techs (way off default settings per instrument), your site has got me nailing the trend. Salute sir!

      • Nope. 60% cash, plus 20% GOLD and 20% USD, both traded on ASX. GOLD approximates the yellow metal priced in Aussie dollars, and USD is what it says.
        Though have been 100% cash 90% of the time since mid 2007, in my Super.
        Trading account, that’s a different matter, and varies day by day.

        • If you see my last blog post I haven’t the benefit of SMSF. So its 100% Cash.

          I’ll cut and paste:

          “As an aside I was bemused this week to read and hear in the MSM about punters fretting over their lost Super assets. Who the f&@* would have their retirement assets exposed to the stock market in these times where anyone with an IQ on the right side of the bell curve knows a Tsunami is brewing?

          Plenty it seems. I came across very intelligent folk who have their super in ‘High Growth’. Why is it called that? Why not call it “Have A Punt” or “Its All Been Put on Red”. I ask these folk to ask themselves if the employer gave you $20,000 a year to invest would you put in a bank or the stock market?

          In 4 years since the ASX was climbing with no end in sight and the US housing crash and global deleveraging storm was a nutters wish list (my super fund):

          High Growth approx -19%
          Cash +19%
          Inflation +12.5%

          So in 4 years, Cash is ahead of inflation by 6.5%, ahead of High Growth by 38%. High Growth is 31.5% behind the inflation curve.

          $100,000 in 2007 is $119,000 today in Cash

          $100,000 in 2007 is $81,000 today in High Growth

          When you lose 50% in an asset you need to make 100% to get back to square 1.

          When you lose 15% off your Super (approx 25year to go) thats an extra year or two you have to work to make that back (a loss of a single 15% this year equates to a payout of about $60,000 less in 20 years and $80,000 less in 25 years).”

      • The timing will depend on your preferred level of exposure to volatility.

        For my long term investing system, it is currently “NOT LONG”.

        This is still a time to stand aside, particularly when we haven’t absorbed the FY earnings of the ASX200 companies yet (by mid September).

        I’m well over 60% in cash in super (long dated term deposit), with the remainder in a variety of asymmetric long and short plays.

        For the “average” investor, the allocation at the moment should be 95% plus in cash and less than 5% in asymmetric (e.g gold call and put options, XJO call options, AUD puts etc) plays.

        Or just buy a few houses……and “hide” there.

        • So you recommend go all in on cash with Super…?

          I have not bothered to meddle with my super in the past, although ill be damned if i want it to go up in smoke being invested in the wrong areas.


      • “Speaking for the millions of voiceless superannuates…”

        …That can asset switch to cash online or a faxed form?

        I believe the MSM and the govt have guilt for spruiking bull[shit] propaganda. Goes to vested interest meets Ponzi.

    • And if you had gold it was up AUD 61 oz today, so you’ll get change out of 1 oz for ” Louis Roederer Cristal 2002 Magnum “

    • The rate this is going, a bottle of water maybe more appropriate.

      Is Australia’s real economic strength rabbits? We shall find out I suppose, may a case of bullets might be useful.