Morning Report Tuesday 26 May 2015
With both the US and UK markets closed last night, I thought I would take the different step of looking at a specific chart pattern. I use a number of factors in making investment / trading decisions including fundamentals, statistics and pattern recognition. A lot of people consider only one methodology, but why when they all have foundation?
• Markets are driven by humans and their money (Fear and Greed), subsequently they repeat themselves just like history.
A “rising wedge” is a bearish pattern that indicates the market is preparing to fall. The trend lines of the pattern converge with both lines slanted in an upward direction, as the price moves towards the apex, the momentum is weakening e.g. The S&P500 has rallied 1.5% in 22 weeks yet the press is still regularly reporting that the US stock market is at all-time highs. When the sellers take control and the price breaks the lower trend line the downside move is often significant and / or dramatic.
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