A price pattern known as a “rising wedge” can make mince meat of investors caught on the wrong side of the move.
This very pattern is unfolding now in the Nasdaq Composite, along with lagging momentum. At the same time, investor optimism is high.
Sounds like a “set up.”
Behold this wicked chart formation:
This chart appeared in the August 9 Short Term Update, with the following comment:
The Composite still remains beneath the July 27 high at 2307.50 as well as the June 21 high at 2341.10, failing to confirm the rise in the NASDAQ 100, the Dow and the S&P, each of which has pushed past their respective July 27 highs. The Dow has carried above the June 21 high as well, so the non-confirmation is even larger relative to this senior index. The rise from the July 1 low at 2061.10 is open to differing interpretation…but the entire push has formed an upward wedge.
Even though upward momentum has slowed, a particular market action can accompany a rising wedge pattern before the pattern is complete.
And this particular market action can catch many investors off-guard.
