The Dow and S&P are busy putting together triangle consolidation patterns while the NASDAQ is building a more ominous right angle reversal pattern. The indexes are making preparations for their next move.
Based on earnings, stocks should be ready to surprise to the upside. On the flip side, Top Equity News sees that nearly all the recent economic reports have come in below expectations.
According to the charts, the disconnect between earnings and news will come to a head in the next week or so. Whether it is a right angle or more traditional sideways triangles, investors need to pay attention to which trend-line the indexes break first.
Top Equity is most concerned with the NASDAQ’s emerging formation. Right angle triangles, with a flat bottom and a descending upper edge, usually occur at the end of runs. If the flat bottom gets broken in a major way, stocks could get an April jump on sell in May and come back some November day.
A breakdown should come to its initial halt at 2900 for the NASDAQ. From there, TEN would expect the index to have a cap at the breakpoint of 2990.
Top Equity expects Apple Inc.’s (AAPL) Thursday earnings announcement and Friday’s first quarter GDP number to be the catalysts that determine which side of the triangle the indexes emerge.
If both numbers are good, then investors will likely avoid our drop scenario above. However, don’t get too giddy if bulls break free, it will be challenging to find new highs for the indexes. New index highs are 100% necessary to confirm that the October-to-April rally isn’t dead.
Keep the dial tuned to Top Equity News as we will keep you informed on what to expect next.
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