Monday, August 18, 2008

Return of the Wedge

The S&P 500 has formed the second ascending wedge formation of 2008. (The first one spanned in late March/early May.)

These formations usually end with the market breaking down through the lower trend line, so that places a pretty strict limit on the current rally at about 1350 on the S&P, the level at which the two trend lines meet. In all likelihood the next sell off will begin before that point, meaning the rally has less than a month to go.

2 comments:

Dan said...

Jody,

What are your thoughts about Karl Eggerss latest post - "No Extremes Yet".

http://keggerss.wordpress.com/

Sounds like the exact opposite of what you are expecting. Karl - short term bearish, longer term bullish, whereas you believe the uptrend is about to come to an end followed by another leg down.

Comments?

Thanks!

Jody said...

He's right that some sentiment indicators aren't as quite as optimistic as they were in May.

I think we're on the same page in the short term: rally coming to an end, followed by another down leg. The difference is that Karl is already anticipating the end of the bear market at the end of the next downward leg, whereas I see no evidence that the bear is done.