Thursday, August 20, 2015

NYSE completes H&S top

Last month we discussed whether the NYSE index was forming a H&S top within a bearish rising wedge. Today's price action suggests that the NYSE index has completed a significant topping pattern:

Other U.S. indexes are at critical support levels. As we discussed yesterday, IWM (Russell 2000) seems to be breaking down from a H&S top.

Remember, we must trade the actual price action rather than our wishes. I lose sight of this truth often. And the warning applies to both bears and bulls. Long-suffering bears may - may - be getting the breakdown that they have been waiting for so long. But this epic bull market has made countless stick saves to continue its run higher. We must trade with discipline and respect our stops. If we are bullish, then we may be proved right again. But we, too, must respect our stops if the market continues to break down. The stock market lost more than half of its value during the 2007 to 2009 financial crisis and 90% of its value during the Great Depression. And yes, these events will happen again for human nature is constant.

Making money is not the traders' priority. There will always be more compelling set-ups. Our priority is surviving and protecting our capital.

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