Way back when I ran money for Bill O’Neil, we were discussing the concept of double-top formations and their implications for future price direction. Bill admitted that these can be bearish patterns but also reminded me that “every cup-with-handle starts out as a double-top.” The difference, of course, is that it forms a handle and sets up before moving higher, whereas a double-top is just that.
So here we sit with the major market indexes looking like they are trying to build cup-with-handle types of formations as they spend the past four trading days chopping slightly down to sideways. The NASDAQ Composite for now acts more like a double-top, posting four consecutive down days off the peak but on successively lighter volume, despite Friday’s options expiry.
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