Descending Triangle Formed...

The Dow was up by 172 points today as investors accumulate around the 8500 support level. However, that did not stop today's candlestick from skewing the triangle formation into a Descending Triangle Formation. A descending triangle formation is the bearish version of the triangle formation with breakout expectation to downside and is characterized by a descending channel line and a flat trend line, forming a right angle triangle. If the pattern holds, we should see an all out bearish breakout within the next 5 trading days. Can this pattern be reversed? Certainly! If the market finds enough strength to at least get back above 9000 points.

The economic data pouring in today continues to be bearish and we all know that the data are going to be bearish for months to come. So, if the stock market is a discounting mechanism, when will the stock market price in a bottom for the recession? Well, based on historical references, the stock market should find a bottom and reverse about 3 to 6 months before the economy recovers (at least in terms of unemployment rate). So, if you think unemployment rate is going to come back down in 3 to 6 months time, you should believe in the current support level. For me? I think this mess isn't going away in just 3 to 6 months time, so I am not about to believe that the 8500 support level is the bottom.