While watching U.S. stock markets rally to near all-time highs, one might wonder when will it end? Borrowing from the Richard Wyckoff market analysis textbook, a savvy trader must consider the possibility of history repeating itself, and what a market top might look like in the future.
Below I've charted a possible outcome of a possible market top in the near future, as we continue to play the waiting game for signs that we will finally retrace.
Below I've charted a possible outcome of a possible market top in the near future, as we continue to play the waiting game for signs that we will finally retrace.
What a Topping Pattern Might Look Like? by infinite_margin on TradingView.com
Also, to further add, we have currently setup a beautiful Bearish AB=CD pattern. All harmonic criteria have lined up and may be indicating a move lower.
AB=CD Bearish Top Setting Up by infinite_margin on TradingView.com
Finally, another long-term sell indicator is lining up with an exhaustion divergence which could also be indicating towards a lower price move, especially if institutional funds decide to push the market up to all-time high, using sell-stops as a means to unload their positions. That notion, could very well be the catalyst to send us lower, as buyers disappear.
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| Source: Financial Sense |
Carl Swenlin of Financial Sense suggests that, "the significance of the divergence becomes more obvious when we understand the indicator. The Percent Buy Index (PBI) shows the percentage of Price Momentum Model (PMM) buy signals for all the stocks in a given index -- in this case the Nasdaq 100 Index. (The PMM generates mechanical medium- to long-term buy and sell signals for individual stocks.) At it's peak in January the PBI showed that 90% of stocks in the NDX were on buy signals (much higher than in September), yet price was struggling below it's previous top. it reminds me of a car with its engine turning at high RPM and the clutch slipping.
Since the NDX is a cap-weighted index, the cause of the divergence is that the larger-cap stocks in the index are not doing very well, not a healthy situation. In addition to the divergence you'll notice that the PBI has crossed down through its 32-EMA. This is a sign that a price correction may be about to take place."
InfiniteMargin is currently holding SPY Puts.
