If you’re bearish, you might look at a pattern called the "Three Peaks and a Domed House." I first learned about this pattern from CNBC’s Ron Insana during the Asian meltdown in 1997 – 1998. He had an analyst on the air every week that basically gave a play-by-play of how the market would collapse in real time. It was amazing. The analyst would pull up the chart and tell you where the S&P would be next week.
That said, the "Three Peaks" pattern is very difficult to trade off of because it’s difficult to know exactly where the market stands in the cycle. It’s like using Elliott Wave to trade…"the market could be in wave 3 or it could be in wave 5…it could collapse on this correction or it could rip higher"…that’s very difficult information to trade.
Anyway, here’s how I think the "Three Peaks" pattern is playing out…
