Thursday, 26 March 2009

Nasdaq 100 - is it an inverse head and shoulders?


Annotated on the chart above for the the Nasdaq 100 Index (NDX) are clear and recurring V shapes that are characterizing the recovery efforts being mounted after each big sell-off.
These formations could also give rise to the notion that a W shaped bottom is evolving although the V in the middle is less convincing that its neighbors.
Another way of expressing reservation about the W pattern is to query what some other analysts are claiming is an inverse head and shoulders pattern and with the accompanying very bullish claim that should we break above the 1300 level we could be headed not only much higher, but also that this would no longer be symptomatic of a bear market rally.
The stakes are quite high on how to correctly interpret these patterns as a decisive break above 1300 would seem to be a game changing development. However for now I remain sceptical about this and would suggest, somewhat tongue in cheek, isn't the head supposed to be larger than the shoulders?
I would be genuinely interested to hear from any readers who feel strongly that I am not seeing the pattern correctly.

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