There’s an ominous pattern taking shape in the stock market. And it could spell big trouble for investors later this year.
Take a look at this one-year chart of the S&P 500…
In technical terms, this is called a “double top” pattern, with the first top forming last September/October, and the second top forming this month. Typically, the two “tops” are separated by a decline of anywhere from 10% to 20%.
This is a bearish pattern that can indicate the reversal from a bull trend to a bear trend. So, it’s worth paying attention to.
Keep in mind, though, that until key support levels are broken to the downside, this pattern isn’t confirmed.
For example, if you look at the action since the market bottomed in December, you can see that every pullback in the S&P has formed a higher low on the chart. So, the first step to confirming this double top pattern would be for the index to decline and make a lower low. That means we’ll need to see the S&P drop below the 2800 level or so.
The next step to confirm this pattern is for the index to make a lower high on the next rally attempt. If the S&P rallies above the recent high at about 2950, then that invalidates the pattern.
For the moment, it sure looks like a double top pattern is forming. But, we need to see a lower low and a lower high on the index in order to be sure.
To understand why this is important, just take a look at this chart of the S&P 500 from 2007…
And here’s the S&P 500 chart from 2000…
It’s too early to say for sure if the pattern developing today will play out the same way as it did in 2000 and 2007. But, if it does, then investors are going to be in for some pain later this year.
Best regards and good trading,
P.S. It’s looking like 2019 may just be the year that this tired old bull ends. For investors, it could be catastrophic. But for traders? Well, that’s a whole different story…
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In today’s mailbag, a Delta Report subscriber gives Jeff a big “thank you”…
Making money on the option trades you suggest has been a wonderful benefit of reading your newsletters. Applying your technical analysis to the rest of my investing has been even more profitable.
Your material is the first thing I read every day the market is open. I can’t thank you enough for the insights you provide.
And a couple of subscribers are excited for Jeff’s new service, Jeff Clark Trader…
I’m excited for what may lie ahead in your new Jeff Clark Trader service and appreciate your thought in your 3-Stock Retirement Blueprint.
I have followed your free emails, which I like very much, and just subscribed to Jeff Clark Trader. I understand the concept of taking only 3 stocks and repeatedly trading them over and over.
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