Broadening Tops

The Dow Jones Industrial Average’s bearish Rising Wedge stayed consistent since the previous time it was shown in April 16’s Dow: Bullish or Bearish?

This is the Dow’s updated bearish Rising Wedge in the framework of the 2-year chart that gives us strong reason to trust that the long-term answer to the question will be quite different from the recent bullish reversal of what had been a near-term downtrend.

Take a look at what the bearish Broadening Top can do in the weekly chart on the following page that does not show the week’s rise.

Perhaps the recent Broadening Top and just a fractal footprint of the larger Rising Wedges that top into Broadening Tops, will somehow avoid both the Broadening Top and the far more bearish Rising Wedge, however there are several good and relatively current chart history suggesting this is not likely.

This is especially valid when the Dow’s recent Broadening Top is pulled apart just around today’s outside candle since it is not known whether it will turn into an outside reversal even though this seems likely.

Particularly if the Dow’s big Broadening Top consists of bearish Rising Wedges that achieve in bullish Falling Wedges and vice versa but with the bearish nature of the pattern indicating that the Rising Wedges will win ultimately as does the small Broadening Top created today on the outside candle with a pattern that confirms at 13175 for a target of 13011.

The pattern is a helper to the current Rising Wedge inside the larger Broadening Top. It confirms the same level but for a current target of 12083 and not quite sub-12000; that had been guessed at earlier.

A reason to assume it will not go sub-12000 as a formal target, even though the Dow may have a Rising Wedge shown on the first page, is the smaller Broadening Top appears to be the apex of the smaller Broadening Top in trading that seems uncannily like last July into August.

The first small Broadening Top resembles the current one in relation to its Rising Wedge at that time and suggests there may be some other sideways trades ahead prior to the resolution. If the comparison carries on into resolution, it is apparent that it will be a bearish and not a bullish resolution.

Consider the current Broadening Top is more compact than the prior one, the reason for drawing the intermediate-term trend-lines differs in the second chart. There is a valid reason to know that such a resolution will not require much more sideways trading before it displays what could be a 10% drop in the big Broadening Top alone. Not to say the multi month Rising Wedge that delivers a 10405 target for a potential decline of 22% and another correction in the many corrections and rallies of the longer 2-year sideways trend.

One should not assume that the Dow’s Broadening Top will do as it expected or as its prior Broadening Tops has done with the potential for the promise of some liquidity.  Liquidity slosh is always possible to cause this pattern to do something unique than what it normally does and that means treating both sides even though this pattern breaks to the downside nine times out of ten.

It’s an unlikely upside scenario, but confirms at a seemingly ridiculous 13692 for an even more outlandish target of 14673 and that would be an all-time high with its downside scenario confirming 12711 for the aforementioned target of 12083.

After the dissection of the Dow’s bearish Broadening Top, it appears more likely that it too will do as its bearish brethren have done before it which equates to a 200-DMA-crossing drop.