A few weeks ago, we noted that stocks looked to be posting a false breakout.
A false breakout occurs when the market breaks out of a technical formation in one direction then fails to follow through on the move. Looking at the rising wedge pattern in the S&P 500 this appears to be happening now:
As you can see, stocks broke out of the rising wedge to the upside. However, this move looks to be rapidly losing steam. We’ve just seen a new lower high. And if the S&P 500 were to fall back below its upper trendline LOOK OUT: failed breakouts tend to resolve both quickly and violently.
Indeed if you look at stocks relative to Copper, there’s room for a REALLY bad correction here:
We’ve noted for some time that stocks had diverged sharply from the underlying economy. But this is a truly ugly chart. And if stocks ever begin to re-connect… it’s going to be BAD.
Investors take note, the market is flashing danger, danger. If you’re taking steps to prepare for a market correction already now is the time to do so.
For some basic steps you can take, visit us at:
http://gainspainscapital.com/protect-your-portfolio/ [3]
Best Regards,
Graham Summers