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WARNING, WARNING....John is getting pretty old and so are his
techniques.....
backtesting Head and Shoulders patterns shows no better than a 50%
prediction of significant, tradeable
bottom or top.
Many fantastic "reversal" rallies have emanated from the neckline....
GOTTA DO YOUR HOMEWORK, John....and less appearances !
> -----Original Message-----
> From: Gary Funck [mailto:gary@xxxxxxxxxxxx]
> Sent: Sunday, July 14, 2002 8:02 PM
> To: Realtraders@xxxxxxxxxxxx Com
> Subject: [RT] John Murphy notes: the market isn't "cheap"
>
>
>
>
> http://www.murphymorris.com/affiliate/market_watch.html
>
> John Murphy's Market Watch
>
> by Mr. John Murphy, President of MURPHYMORRIS.COM
>
> Sat, July 13, 2002 - HEAD AND SHOULDERS TOP?
> WHAT IS IT?... Quoting from the Glossary in my book Technical
> Analysis of the
> Financial Markets: "A head and shoulders top is the best known of
> the reversal
> patterns. At a market top, three prominent peaks are formed with
> the middle
> peak (or head) slightly higher than the other two peaks
> (shoulders). When the
> trendline (neckline) connecting the two intervening troughs is broken, the
> pattern is complete." While most major averages show a similar
> pattern, we're
> using the NYSE Composite Index for illustration purposes because
> we believe it
> probably gives the best overall measure of the state of the
> "market". There's
> no question that the chart has the look of a "head and shoulders"
> top. The two
> "shoulders" were formed during 1998 and 2002. The "head" formed
> during 2000.
> The "neckline" is drawn under the 1998-2001 reaction lows. As of Friday's
> close, the neckline is already been pierced on the downside, but
> not by much.
> There are two other support levels that bear watching. The first is the
> intra-day low hit last fall (which is at 494). The second (and
> more important)
> is the late 1998 low at 463. Friday's close was only a shade below last
> September's low, but not by enough to call this a clear breakdown
> -- at least
> not yet. Regarding the breaking of the "neckline", there's also a
> 3% rule which
> comes into play at major chart points. That means that the
> neckline needs to be
> broken by at least 3% before we can call it a "major" breakdown.
> We may get
> there (about 485), but we're not there yet. Unless the market
> attempts a rally
> soon, however, a breakdown could be imminent, which could carry the market
> lower into the September/October period.
> [...]
> THE MARKET ISN'T CHEAP... The purpose of looking at the long-term
> charts isn't
> to scare anyone. Our main goal is to show that this market isn't cheap. In
> fact, it's still historically very high. We've expressed the view
> several times
> before that we believe the twenty-year bull cycle has ended. That
> means the
> current bear market could last longer -- and fall much further --
> than most
> people realize. We don't know how low it can go. It's the direction that
> matters most -- not the actual numbers. The "head and shoulders"
> tops shown in
> the preceding charts is another warning that things could still get a lot
> worse. As the message is finally getting across to the public
> that this bear
> market is indeed different from those in the recent past, mutual fund
> redemptions are starting. Imagine what could happen when the
> public finally
> decides to start selling.
>
>
>
>
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>
>
>
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>
>
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