Classic Head and Shoulders Pattern
Aligned with Elliott Wave Analysis August 17, 2010

The article below details the current Head and Shoulders Pattern forming in the DOW and how it aligns perfectly with Elliott Wave analysis.

If you are considering taking on any new long positions, it may be a good idea to pay close attention and think twice before doing so. Whatever you decide, please use good money management and stop losses.

Pay close attention and take notice of the downward sloping neckline and decreased volume on the right shoulder as explained in the article. These are textbook signs of the pattern unfolding.

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Slicing the Neckline: A Classic Technical Pattern Agrees with the Elliott Wave Count

August 17, 2010

By Elliott Wave International

In the August issue of his Elliott Wave Theorist, market forecaster Robert Prechter alerted readers that the U.S. stock market was slicing the neckline of a classic head-and-shoulders pattern in technical analysis, and that this may send the market into critical condition.

Prechter said that when the Elliott wave count and a head-and-shoulders pattern are saying the same thing about the stock market, it's best to pay attention.

Read some of the latest nuggets directly from Robert Prechter's desk -- FREE. Click here to download a free report packed with recent quotes directly from Prechter's Elliott Wave Theorist.

Here's how the August issue of the Elliott Wave Financial Forecast, the sister publication to Prechter's Theorist, described the head and shoulders pattern unfolding in the stock market:

"The weekly Dow chart [below] shows the development of an intermediate-term, head-and-shoulders pattern from the January high at 10,729.90 to the present. The January high marks the left shoulder, the April 26 high at 11,258 is the head, and the right shoulder is now ending. The April [Theorist] discussed the pertinent characteristics that Edwards and Magee used to define this technical pattern ... all apply to the current formation. Observe how weekly stock trading volume has contracted during the development of the right shoulder, a necessary trait of this pattern. The downward-sloping neckline -- exactly as on the big ten year pattern -- displays market weakness, which is consistent with our interpretation of the wave structure."

This chart shows the head-and-shoulders pattern.

Here's what Robert Prechter himself said in a recent Elliott Wave Theorist:

"Generally, when the neckline slopes downward, the right shoulder does not rise to the level of the left shoulder ..."

Please look at the chart again -- then re-read Prechter's quote.

Read some of the latest nuggets directly from Robert Prechter's desk -- FREE. Click here to download a free report packed with recent quotes from Prechter's Elliott Wave Theorist.

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