Less Than 10 Days Before a Major Stock Market Crash!

Financial experts are warning that a rare stock market pattern called a “megaphone” could signal a catastrophic 70% decline in the Dow Jones Industrial Average and lead to a massive stock market crash in the next couple weeks.

A megaphone pattern forms when the stock market goes through a series of higher highs and lower lows. It’s called a megaphone because its shape resembles the voice amplifier that cheerleaders use.  The entire megaphone pattern usually consists of three ascending peaks and two descending troughs ending in a steep decline.

The megaphone pattern is also called the “Jaws of Death” pattern. The alternating higher highs and lower lows lead to increasing volatility. That causes investor uncertainty, profit-taking and less investment from stock market bulls. 

The S&P 500 went through a large megaphone pattern, topping in 1965, 1968 and 1972 before it crashed 42% in 1973. Now the Dow is following its own megaphone pattern. Beginning in November 1994, the index rose for six years, topping in January 2000, the first high. A low followed in the October 2002 crash.

The Dow rebounded and rose even higher in October 2007. The megaphone pattern continued with a lower low in March 2009.

Now experts see the third and final top forming. They point to last summer, when the Dow Jones briefly broke above a resistance line within a similar megaphone pattern based on the 2000 and 2007 market highs. But the breakout didn’t hold, and a market correction took the Dow Jones back below the megaphone support line.

Last year many experts predicted that the Dow shouldn’t go much higher than 17,700 before a rapid decline. Yesterday the Dow broke above that number but dropped 162.5 points to close at 17,568.

Experts also caution that even though the S&P and Dow have been hitting new all-time highs, analysts say that these highs have been made on lower and lower volume, with less and less underlying participation.

All of the indexes closed lower yesterday with negative internals. Many analysts noted that the Dow Jones Transportation Average, a stock market index of the transportation sector, closed below support, raising a “yellow flag” and triggering “strong sell” recommendations.

Over the last two days the Dow has suffered two triple-digit losses, tracking a sell-off in global markets.  Are we about to see the Jaws of Death close on the Dow?

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