Stocks Stall And Now Face Ominous Triple Top Pattern
Michael Kramer | Dec 09, 2021 12:49AM ET
It was a super dull day, with the VIX closing below 20. With a big volatility melt on Tuesday, the S&P 500 struggled to get its footing yesterday. Essentially, the index has been churning around this 4700 level since the beginning of November.
The gap from Nov. 26 is now completely sealed, and the S&P 500 briefly moved above that resistance level but was unable to close there. Interestingly, the index rose to 4705.06, with just 10 minutes left in the day, but finished at 4701.22. I mention this because the old closing high was 4704.55 on Nov. 18, and it closed at 4701.45 on Nov. 24. The previous high was back on Nov. 8 at 4701.69.
I bring this up because the big rally over the last three days has left the index just shy of a new high, but more importantly, just shy of each of the previous highs. It also would give us a pretty near-perfect triple top in the S&P 500 if we should reverse lower from here. It is a big IF, and there is no doubt in mind if I detect something so small and minute, the algos have already done the same.
There is also a right-angled descending broadening wedge pattern. The data is pretty mixed on what this means as to whether it is considered a bullish or bearish pattern. I have minimal experience with them myself, so there is a lot of guesswork on my part here.
But I counted the touchpoints from one side to the other and based on the number of touches from high to low and back; it works out that the most recent touchpoint was an “E,” which would also support the triple top pattern narrative above—suggesting a move down. Nothing would be confirmed even if we dropped Thursday until we took out the most recent lows around 4,500. So, for now, we can wait and see.
The Qs did not fill the gap Wednesday, which I was surprised by. If it doesn’t start to fill today, I would be concerned; it is not going to fill anytime soon. We might want to also consider a head and shoulder pattern here.
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The AUD/JPY pair has also been strong recently, but it is up against the 23.6% Fib trend, which has offered resistance. I would currency cross to turn lower and back below 80.
Roku (NASDAQ:ROKU) had a strong day on Wednesday and is about halfway back to $285. I expect that it will continue to push towards that price.
The gap for Zoom Video (NASDAQ:ZM) is now filled, and the stock is now completely oversold. It probably has one more push higher over the short-term on its ultimate path lower, with a stop at $230.
Citigroup (NYSE:C) said its trading revenue would be flat or down from the fourth quarter of 2019 at yesterday's Goldman conference. The stock is now sitting on support at $62.50. If that support level breaks, it could fall to around $58.65.
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