Pull up a chart of the DJIA and you will see a classic wedge pattern of lower highs and higher lows that has been forming since January 10.
These wedge patterns form as a result of uncertainty by investors about the direction of the market. Upon further examination, you may notice that the successive lows have been rising in a shorter time frame than the highs have been falling. Although somewhat subjective, this is normally considered to be a bearish formation.
Today’s trading of the double reversal-schizophrenic market, supports the case for uncertainty and paranoia in the marketplace.
Does anybody really know what they’re doing right now?
This might be setting us up for a test of the January 22 lows. The probabilities are high that the market will breakout from this wedge, and in more cases than not, it will be in the direction of the prevailing trend.
Note that this current wedge pattern is a repeat of a wedge that formed from the end of October through the end of December of 2007….. And then there was January.
The bears may have lost the battle today, but the war is certainly far from over.
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