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Greece drags at every market. We described the Dow several weeks ago as a gecko hanging on a roof, defying gravity. It has hit a slippery spot, and lost its footing. If this creates a major reversal in markets then we are headed for a repeat of 2008. If this is a minor top within an up trend retracement then there is no need to panic.
The Dow has developed a minor top up trend reversal pattern. This pattern developed as part of a long term up trend line that has been acting as a resistance level. This trend line is a projection of the neck line from the head and shoulder pattern that developed between January 2011 and August 2011. In recent months the Dow has used this up trend line as a resistance level.
A major top of up trend or end of up trend pattern is when the chart pattern measurement target is far below the current index levels. In 2007 the head and shoulder pattern downside target was 3000 points lower than the high of 14,000. This indicated a significant market fall.
The current Dow pattern of behavior developed a small rounding top pattern over the past 10 weeks. The pattern development time is short, and the height of the pattern is small. These are the features that suggest a minor market retreat rather than a full scale market collapse that repeats the falls in 2008.
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