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Home > Articles > The Markets > Whole Scale damage

Whole Scale damage
Nov 14, 2008

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Declan Fallon

Fallond Stock Picks
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No stone was left unturned during Wednesday's rout. The head-and-shoulder pattern discussed in my earlier posts is a cooked goose. Now it's a question as to whether October lows will hold as support?

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For now, the best case scenario for the S&P is a sideways pattern to help digest the losses. Neckline resistance remains unchanged from before, so the conditions required for a breakout are the same as for the head-and-shoulder reversal pattern.
The Summation Indices are clinging to their 'buy' signals - although I suspect a rally today would not be enough to prevent a 'sell' trigger in these (NYSI shown only):
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Yesterday's Tick suggested a capitulation (although yesterday's very weak close did not):
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However, I am still looking to the Transports for early (leading) strength. Wedge resistance was sliced following a positive test of channel support. Add to that a break of the long standing bearish divergence in stochastics and you have a recipe for a (positive) backtest of 3,359 support which should coincide with a similar backtest in stochastics:
 
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by Declan Fallon (Fallond Stock Picks)

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