If you're bearish (Torino Three Peaks Edition)...

If you're bearish, you don't get better set ups than we currently have on the Three Peaks and a Domed House Pattern.  Essentially, you can make a short bet right here with a great risk/reward ratio, with a  stop-loss slightly above recent market highs.  The reward would be a market that first retest January lows and potentially goes down further. 

The Three Peaks pattern has finished the top of the Domed House at point 25 and should now head straight down to point 26.  Here's how the pattern looks on the Wilshire 5000...

Comments

[john]

Do you think that the market will have a semi/full blow-off top, capitulation buying before heading down?

[ContraHour]

A blow off is certainly a good probability. Here are two alternate counts of the Three Peaks formation that would argue the peak is yet to come...

http://carlfutia.blogspot.com/2006/02/domed-house-update_16.html

http://www.traders-talk.com/mb2/index.php?showtopic=48751

I still like my count because it seems very symmetrical and my other indicators show a market top is forming. That said, I'm not going to stick with my count if we see new highs on the broader market in the upcoming week(s).