There Goes The Second Week....

The weekly chart pattern for the Dow has never looked this gloomy for decades.

The second week of the new year ended the Dow down 1.51% and broke through the neckline of the most perfectly formed head and shoulder formation that I have ever seen on the Dow. A head and shoulder formation is a technical chart pattern which is a chart pattern looking like 3 mountain peaks with the central peak higher than the other 2 by its sides. All 3 mountains have the same support level, called a neckline, which in this case is around 13000. A break below this neckline is an extremely bearish signal. Furthermore, this head and shoulder formation break is supported by all kinds of bearish fundamentals, making it less likely to be a Bear Trap. In fact, any rally next week would very likely, as I have mentioned, to be a dead cat bounce. The credit crunch is far from over with Merrill Lynch announcing more writedowns. Its definitely going to be a very bumpy 2008 ahead. In fact, like all crisis, we should see a couple of high profile wind ups, which so far, none have happened yet.


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