Morgan Stanley identifies next wave of AI-linked "alpha"
The Market’s Acting Like It’s Going to Drag Out This Top with a Big Triangle Right Shoulder
This market isn’t acting like a proper orderly and sedate head and shoulders top.
It’s acting like a triangle top, which is essentially a big triangle right shoulder on a head and shoulders top.
If a big triangle right shoulder is forming, this wave down to the triangle bottom should be complex, literally forming a false triangle (gray bottom) before completing its trip to the real triangle bottom (red). Today’s price action, by converting a simple nested H&S set-up into a megaphone top with interior megaphones, strongly suggests the price action will be complex.
The next move down to the true triangle bottom should take roughly three months.
This wave should retest the potential triangle top before getting to the bottom, and today’s price action suggests a retest should happen sooner rather than later. When ES cancelled its beautiful complex H&S set-up, it all but committed to a retrace to 2100.
Plus, in addition to the complications involved in dealing with the breakout from the gray false triangle bottom, there could be complications on the upside if ES decides to morph the entire H&S with triangle right shoulder into a larger megaphone top.
In normal EW terms, this is likely to be a big 4th wave triangle before a small 5th.
Get ready for some difficult trading in a prolonged sideways move.
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