In short, it’s a weird stock market pattern identified by market technician George Lindsay. You can read more about the pattern at RealMoney Pro.
Coincidentally, the market has eerily been following the path of the pattern.
What’s the next stop?
It is important to recognise that “Three Peaks” took us to the near-1420 top in the S&P in March 2012 (a market level that few thought imaginable in August or October of last year), and if the fit continues and a stage 23 top has been formed, it “should” take us down more than 20% to about 1100! (If we use the Dow Jones Industrial Average and a stage 23 top has been established, Lindsay’s DJIA target would be under 10,500 (down from 12,900 today)!)
But Kass admittedly doesn’t take technical analysis very seriously:
Here is my thought process of the usefulness of “Three Peaks” and other technical configurations. To begin with, I am a fundamental investor who uses technical analysis for, at most, 10% of my investment decision-making process…
To me, Lindsay’s “Three Peaks” and other technical patterns should be treated as an oddity, a simple coincidence, and should not be taken as gospel — much as, for example, Fibonacci sequence, which provides some of the mathematical basis for Elliott Wave studies, should be taken with scepticism. Though nature has its ebbs and tides, technical analysis (that replicates that nature) is a stretch to me.
Here’s a look at the chart via RealMoney Pro (Click to enlarge)
Photo: RealMoney Pro
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