Monthly Archives: May 2016

Two Big Time Bearish Calls on CNBC in One Day

Russ Koesterich, head of asset allocation for BlackRock’s Global Allocation Fund, told CNBC’s “Halftime Report” that it would be hard to hold the gains in the market into the summer and fall;

and later on “Fast Money,” Bank of America Merrill Lynch Head of US Equity and Quantitative Strategy, Savita Subramanian said that she believes the S&P can drop by 15% this summer.

A Plethora of Channel Patterns on the S&P chart

Technical patterns are very clear in retrospect, but harder to discern when they are under construction. What looked like a head and shoulders top on the S&P 500 daily chart a few weeks ago, now looks like a simple channel consolidation. Looking back over time, there have been a number of these consolidation patterns.


Moving average convergence/divergence (MacD) is making a bullish crossover and overall volume is on the weak side, but more concerning, Chaikin money flow, while still in positive territory, is tracking below its declining 21 period average.

Berkshire Hathaway – Multiple Timeframe Bearish Eveningstar Patterns

I noted back at the beginning of the month that Berkshire Hathaway (BRK) shares were showing signs of fatigue, and that a rudimentary eveningstar pattern had formed on the weekly chart.


The eveningstar pattern is a three day reversal formation consisting of a large white candle, followed by a narrow opening and closing range doji candle, and completed by a large dark candle. It reflects a bullish to bearish transition in investor sentiment and is often seen at market tops or important levels of technical resistance.


Since that time, the stock has moved back into a zone bordered by $144.00 resistance and $140.00 support. The weak close on Thursday formed a large dark candle resting on the 50 day moving average and completing another eveningstar pattern, this time on the daily chart. This second pattern formed at the top of the right shoulder area of a head and shoulders reversal pattern that has been under construction for the last three months.

There is a high degree of correlation between Berkshire shares and the S&P 500 index but it remains to be seen if these ominous formations reflect underlying issues in the index and are a precursor to weakness in the broader market.

General Electric Fails to Follow the Broader Market Movement

General Electric (GE) closed off its highs and near the bottom of its range in Wednesday’s session, forming a high wick doji candle similar to others seen at previous failed tests of its channel downtrend line. The major indices have broken through similar downtrend lines on their charts this week, unlike GE which is generally a good proxy for the broader averages. Over the last two months the DJIA has outperformed GE by 5.3% and the S&P 500 index has outperformed the stock by 5.9%. This atypical relationship is something to continue to watch.