NYSE Top Formation Says We Should Expect Prices To Fall To Thousands

On a review of NYSE price formations over several times frames something quite interesting has reared its head to challenge the commonly held assumption that the long term trend of the stock market is up.
Specifically the evidence that refutes the long term up trend assumption can be seen by the appearance of several diamond topping patterns that have occurred on multiple time frames, most recently a duration of the past year, but perhaps more importantly also a larger one with a duration of the past 20 years!.
Whilst several diamond topping patterns of a 1-2 year duration can been clearly be seen in a 20 year weekly or monthly chart of the NYSE, so too can a very large diamond topping pattern be seen that has a formation duration of 15 years.
Quite ominously, this 15 year pattern appears now to be close to completion, and as it resolves it will target 1000 in the NYSE over the coming 3-7 years, some 70% below current price levels of 7000 at the time this article is written.
It is important to note that this pattern takes no account of economic conditions and is purely a technical analysis of price patterns that can clearly be seen in the NYSE at this time. Whether or not the pattern completes and whether or not we see a 1000 level in the NYSE - only time will tell, but with this pattern having a success rate of nearly 80% the odds certainly appear in its favor.
To watch the video in support of this view please click here or alternatively read on to find out more about the diamond topping pattern.
Lets look in a little more detail at this pattern, setting aside the potential outcomes for the broader equity markets.
For diamond tops, the prior price trend is upward where the diamond acts as a reversal of the prevailing price trend with a volume trend that diminishes over time. Volume on the breakout however is usually high.
Whilst these formations have a failure rate of around 20%, they still resolve as you would expect 3 out of 4. Quite good actually.
The average decline of (21%) is about what you would expect for a reversal.
The short-term price trend is up just before the formation, leading to the minor high on the left. Then prices decline and form a minor low before moving higher again. They continue to fluctuate forming minor highs and lows in a diamond shape when the peaks and valleys connect.
Most diamond tops are not symmetrical, irregular diamond shapes are common for diamonds.
For diamond tops, prices usually trend up to the formation. With this definition, diamond tops need not form at the top (or bottom) of a price chart-they can form anywhere.
Having said this we must be aware that not all diamond tops and bottoms work out as expected - so keep your wits about you.