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Guy Tann & Jim Greening have had an ongoing dialogue in a thread entitled
"Finally a Signal!!". This comment speaks to their analysis of a wide channel
in the Dow of 1350 points and in the SPX of 150 points. Could this channel may
be the right shoulder of a H & S top? Vizualize the Dow as follows:
Left Shoulder:
7355 to 8200 / 8300 from June 1997 thru Jan 1998.
Head ( or Double Head)
In Feb '98 the Dow rose above 8300 to 9200+ in April/May. Then after a slight
dip rose to a new high of ca. 9367 on July 21st. Then it collapsed to a low
of ca. 7400 on 9/1/98.
Right Shoulder - Now Forming.
After holding reasonably well at above 7400 it bounced to 8100 a few days ago.
If we continue in a trading range of 7400 to 8200 for 5 to 6 months, the H&S
top would become a reality. Any break thru the 7355 / 7400 neckline would
result in an ultimate collapse to ????. (Measured move would be from the
neckline of 7355 to the high of 9367 for a drop of over 2000 points from 7355
to ca. 5355!!!)
The same picture can be seen on the SPX: Left Shoulder in the 910-985 range;
Right shoulder in the 955- 1045 range and a slightly upward bias neckline from
930 in Dec 1997 to 955 range in Sept 1998.
The above senario also seems to fit the gestation of the asian contagion
spreading throughout the world and into the US economy in the next year.
Please do not hang me on the precision of the numbers above. They are close
enough to support the hypothesis. One question I have is whether such a long
time to form a H&S is applicable. Neither Edwards and Magee nor John Murphy
speak to the length of time for formation in their books (at least that I
could find). Any input would be appreciated.
Jim Barone
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