“As I write this Thursday night, I have no idea what the stock market will do on Friday. But I do know the risks of an implosion are building daily. My own view is that a sharp spike in volatility (i.e. a sudden downdraft in the market) could happen within the next week or so, not months from now. But I tend to be impatient, so I might be completely wrong.
I have two reasons to think this: one is short-term, the other is long-term. A few days ago frequent contributor Jed H. sent in this link on a “megaphone top” chart formation which suggests a major market top is in place: The Dow Industrials are Wrapping Up a Pattern Similar to 1929 (11/3/06)
Now scroll down to the 12/4 post on Chris Johnston’s trading blog (“I Am a Futures Trader,” recommended by longtime reader S. Berkland) for his description of the same pattern only on a short-term chart. This suggests a big drop is imminent. ”
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