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A BIGGER Head and Shoulders Formation: What's Next in THIS Pattern?
Be Ready for the Next Big Move
By Bob Stokes
Mon, 15 Aug 2011 17:15:00 ET
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NYSE prices recently crashed through the neckline of a head and shoulders pattern.
 
Before prices plummeted, Short Term Update subscribers read this:  
 
"The neckline runs through approximately 7900 and a solid close beneath it should lead to an accelerated market decline."
STU, July 20
 
That's exactly what happened.
 
And days before the most recent low, our August 5 Financial Forecast set a minimum target for the decline:
 
"Sometimes a short-to-intermediate-term target can be derived by taking the number of points between the head and the neckline and subtracting that total from where prices break the neckline. That level predicts a minimum fall to 7080..."
 
Well, this chart from the August 12 Short Term Update shows how the above analysis worked out. Prices rallied only after slightly exceeding the minimum target:
 
 
 
As a reminder, February 18 was the left shoulder top of the head & shoulders pattern. The May 2 high marked the top of the head, and July 7 saw the right shoulder top.
 
In other words, the pattern unfolded over months.
 
That said, there's a bigger head and shoulders pattern -- one that has been forming for  years. 

Tags: Bear market, head and shoulders pattern, New York Stock Exchange (NYSE), Short Term Update, technical analysis
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