As we continue to scan the charts for setups and trigger to alert our followers, we’ve come across a setup that may be more ominous than what it appears. Recently we’ve posted articles about how the SPY and the NQ have pushed into new all-time high price territory and how Gold is setting up for a momentum base that should launch precious metals to near highs. We’ve also discussed how we believe the current upside price bias in the US stock markets should last another 10~35+ days before new price weakness sets up – possibly pushing prices lower in late May or early June 2019.
Our research team has been scanning the charts looking for anything that could give us an edge to the potential setup for this price weakness in the future. We believe the Transportation Index and the Financials could be keys to understanding how far the upside rally can continue and when a price peak may begin to warn of a potential price top or rollover.
An Island Top is a pattern that sets up with an upside price gap followed by sideways price action above that gap. In theory, this type of setup should promote the gap to be filled with downside price action before any further upside price move can continue. Although, gaps to the upside are fairly common in strong uptrends. Given the strength of the earnings data released early this week and the expectations that we have for some continued upside price bias over the next 10~35+ days, we are watching these Island Top formation in the Financials for any signs of weakness to alert our followers. Continue reading "Financials Setting Up An Island Top Formation"