Here’s another attempt from the world of technical analysis to find a pattern that suggests the market might be in for trouble (we’re not sure why people won’t just admit that stocks are never going down again).
It’s from Claassen Research and it’s a 23-point formation.
The Three Peaks & the Domed House (TP&DH) price pattern can be found in many time frames, but is most common as a very long term price pattern that typically takes eighteen months or more to complete. It’s very detailed, having 20-eight precise points, and is a reversal pattern. It occurs at the end of bull markets, and, by its conclusion, reverses the bull trend to bear.
In the first chart below we have illustrated a “text book” schematic of the TP&DH pattern, and labelled each identifying feature. In brief, the pattern starts by forming three peaks (numbers 3, 5 and 7) that form a sideways consolidation. After the third peak, the index declines sharply, down to point 10. The period from point 10 to point 23 is an advance lasting as long as or longer than the creation of the peaks, and often ending at a new rally or index high. Lindsay’s original paper on the details of this pattern was thirteen typewritten pages. Obviously, we will only generalize the high points here. But, if you wish to read the entire piece, simply email me and we will make a copy available. When George Lindsay wrote his article, he argued that about half of all bull markets ended with this pattern and listed out each instance from the late 1800’s to 1970 to prove his point.
So where are we seeing this now?
Look no further than emerging markets. If they tumble, watch out!
Business Insider Emails & Alerts
Site highlights each day to your inbox.