Double Top Is a Clear Warning

Over the past couple of weeks, we have seen some indecision by the market to continue the trail blazing run that it has been on since early March. With that said, a clear double-top pattern is emerging in all of the major indices. Now, let me just say also, that most of the time your best and most reliable double top formations occur over a 2 to 3 month period if not more. This double-top has been formed at just under a month – so it is not as reliable as your more traditional technical patterns.

However what is troubling about this particular formation is the lower-high that was put in on the second top as well as the uptick in volume seen over the last two days that form the second half of the second top (you follow?). Right now, with where the S&P closed today we sit right at the base of the double top, also known as a collar (a term adopted from the head and shoulders pattern). If this base is broken, and it very well could break tomorrow in all of the major indices, then I would guess we have at least another 100 points to the downside after the break.

So saddle up folks it should be a fun ride.  By the way – hope you got into our day-trade today (which you should have since it is FREE and you therefore have no excuse) on a short of (SPY). We shorted at 89.07 and covered at 88.26, and since our stop loss was only at 89.47 (yup, a stop-loss of 0.4%), we therefore had a return of 2:1 on our risk dollars or what we call 2R – and Yes you can make a butt-load of money on those types of moves – just register and you’ll find out how!

Here’s the Nasdaq and S&P charts…