Double Top or a Breakout to New Highs?

There is an interesting development going on right now with the Dow Jones Industrial Average, the S&P 500, the Nasdaq and their small-cap brethren the Russell 2000. When you look at the charts of the Dow chart, S&P 500 chart and the Nasdaq chart, these indexes are close to or at a double top formation pattern. In short, a double top from a technical analysis standpoint is two successive rises to the same price zone. If the double top pattern holds true to form, this could mean a reversal of the upward trend and a subsequent pullback.

Now let’s take a look at the Russell 2000 index chart of small-cap stocks. Here the Russell 2000 established a double top pattern and then broke through it and has continued to move higher. It will be interesting to see if  the “Big 3” bellwether indexes can follow suit? What probably will be the deciding factor in whether or not the Dow, S&P and Nasdaq will breakout or for that matter breakdown, is the upcoming first quarter corporate earnings reporting season which is about to begin.

Have a safe and prosperous week.