Jeff Hirsch: Bad days coming for SP500

The stock market is cruising toward a weekly win, looking unfazed by the possibility of another shock-the-world vote over the weekend.

“With the French elections bearing down on markets, the bulls seem to be wrestling back some control here,” says IG’s Chris Weston.

Some traders have visions of U.S. tax cuts dancing in their heads again. That’s even as pundits say last night’s attack in Paris could help bring about a “madame president” this time.

But there could be trouble ahead for the S&P 500, according to Stock Trader’s Almanac editor Jeff Hirsch, who provides our call of the day. He is basing his warning on a chart pattern — not everybody’s thing, but Hirsch says this one is “arcane yet uncannily accurate.”

“Our old esoteric chart pattern friend, the Three Peaks and a Domed House Top pattern (3PDH), is potentially in play again,” he writes in an Almanac Trader blog post.

So it’s bearish that the S&P has sketched out this complex pattern, though Hirsch graciously adds that he does not expect a plunge of 20% or more.

Here is the textbook look for the 3PDH:

How good is this pattern’s recent track record? Hirsch suggests it helped its believers avoid the market carnage in late summer 2015. And in mid-2011, stocks did lose more ground after a MarketWatch column spied the Dow carving out this odd and ominous formation. But fears about a 3PDH taking shape six months ago (just before Election Day) obviously were overblown.

Source: Market Watch

Jr Trader Petar Milanov

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