Of all stock technical analysis patterns, probably the most famous is the head and shoulders pattern.
Edwards and Magee call it “the most reliable of the major reversal patterns,” on in their seminal work Technical Analysis of Stock Trends (Sixth Edition, p. 64).
What is it and what does it mean?
As the name implies, the pattern looks like the silhouette of a head and two shoulders.
What it implies is that a stock is losing its upward momentum and is set for a large decline.
As a healthy stock advances it makes higher highs and higher lows.
The head and shoulders pattern reveals a stock that is stagnating. First it rallies as before, then suffers a pullback, creating the left shoulder and the first point of the neckline. The next rally attempt results in a higher high — the top of the head — but also a return back to the previous low, establishing the second neckline point. The final rally attempt is weak. It cannot make it back to the previous high before crashing back to the neckline.
This is exactly the price action we see demonstrated by the once formidable Intel. This pattern has been building for over a year. If the pattern is valid, the stock will break down through the neckline “by a decisive margin” according to Edwards and Magee (p.69). Measuring the height of the head from the neckline implies a potential decline to 21.
(But these things don’t always work out.)
Earnings will be released on Wednesday, July 15th after the market close. Expect that report to be a catalyst for a large move in the stock.
Ready for a Second Great Depression?
The Second Great Depression is upon us, being skillfully hidden by government and media powers that be.
There is a long term structural shift in the economy, with multiple feedback loops:
Technology is moving forward ever faster, and will not cease its relentless march during during the Second Great Depression. Spectacular advances continue, but mostly under the radar and without much fanfare, even as our world is reordered.
The Economy, the realm of personal economics, businesses, markets, macroeconomics, currency wars, fiduciary instruments and the larger universe they inhabit, is shaped by technology. Both of these have profound impacts on…
Society & Social Phenomenon The Second Great Depression shows up in unusual and unexpected ways as society is reordered in revolutionary ways. Ultimately, these uncomfortable changes put pressure on how society is ordered, which brings us to…
Politics and Government Government is the ultimate crowd: The last to catch on, and the one left holding the bag at the end. Don't be caught off guard. Keep abreast of events as they unfold. The Second Great Depression will not be televised. It will be brought to you live.
- - -
I've often said that 2008 was just a speed bump on the way to the main event.
I do believe that we are in for something absolutely catastrophic when it comes to the global economy.
Looking at the chart, this is total debt, including the private sector - home loans and such, as compared to GDP. In 1929, after the crash, there was a huge rise in outstanding debt, but what it actually represented was the economy shrinking. So debt became a larger and larger in proportion, compared to the economy. Mind you, this is not because debt is rising. People did not take on a whole bunch of debt in 1930, '31 and '32. What was happening was that the economy was shrinking. So this chart rises because the debt is a larger portion of the economy. And then, this is all liquidation here. This is people losing the family farm, and homes being foreclosed on, farms being foreclosed on and businesses going out of business.