Year End summary of German DAX Index

To complement the charts I posted yesterday, I thought I would add the German DAX index over a longer history than I had before. As you can see from the chart below, this Index also has a Head and Shoulder Pattern which dominates its 40 year history.

Now Head and Shoulder patterns do not mean that this market will necessarily drop from here, but here is the definition for that pattern from Investopedia:

"The head-and-shoulders pattern is one of the most popular and reliable chart patterns in technical analysis. And as one might imagine from the name, the pattern looks like a head with two shoulders.

Head and shoulders is a reversal pattern that, when formed, signals the security is likely to move against the previous trend. There are two versions of the head-and-shoulders pattern. The head-and-shoulders top is a signal that a security's price is set to fall, once the pattern is complete, and is usually formed at the peak of an upward trend. The second version, the head-and-shoulders bottom (also known as inverse head and shoulders), signals that a security's price is set to rise and usually forms during a downward trend.

Both of these head and shoulders have a similar construction in that there are four main parts to the head-and-shoulder chart pattern: two shoulders, a head and a neckline. The patterns are confirmed when the neckline is broken, after the formation of the second shoulder.

The head and shoulders are sets of peaks and troughs. The neckline is a level of support or resistance. The head and shoulders pattern is based on Dow Theory's peak-and-trough analysis. An upward trend, for example, is seen as a period of successive rising peaks and rising troughs. A downward trend, on the other hand, is a period of falling peaks and troughs. The head-and-shoulders pattern illustrates a weakening in a trend where there is deterioration in the peaks and troughs.

Head and Shoulders Top

Again, the head-and-shoulders top signals to chart users that a security's price is likely to make a downward move, especially after it breaks below the neckline of the pattern. Due to this pattern forming mostly at the peaks of upward trends, it is considered to be a trend-reversal pattern, as the security heads down after the pattern's completion.

This pattern has four main steps for it to complete itself and signal the reversal. The first step is the formation of the left shoulder, which is formed when the security reaches a new high and retraces to a new low. The second step is the formation of the head, which occurs when the security reaches a higher high, then retraces back near the low formed in the left shoulder. The third step is the formation of the right shoulder, which is formed with a high that is lower than the high formed in the head but is again followed by a retracement back to the low of the left shoulder. The pattern is complete once the price falls below the neckline, which is a support line formed at the level of the lows reached at each of the three retracements mentioned above."

I hope this lengthly definition helps you analyze the charts yourself. For additional information on chart patterns, I find the book "Technical Analysis Explained" quite useful

Bush, War and History

The basic backdrop for a speech to be delivered to the Veterans of Foreign Wars (VFW) convention in Missouri today is the following headline, "Bush: History to prove Iraq war worth it". There are two things certain about History. The first being, yes, there is always debate about wars, but that's because individuals still alive have a biased viewpoint depending on whether they supported the war in the first place or didn't. Secondly, there will be no doubt when the history is written, that this President, President Bush, will be recorded as the worst President the United States ever had in its history, even if that history is written 500 years from now.

I hope and pray that the populace of the United States, learns and reads history so that we never repeat voting for a President that was an addict again. The main theme of an addict is denial, and the record was set on the number of times he would be in a state of denial, when this President first took office and never will be broken. He lives in a constant state of denial and, as a Nation, we are all far worse off for it.

I have considered reading several devaint newpapers or rag sheets as they are often called. You might ask "Why?" Investigative reporters should spend some of their time exposing addictions of our Presidential candidates. Then they would truly be serving the public interest. Maybe I really should start reading the NY Daily Post or Enquirer as my source of knowledge of these candidates. Watching the debates or reading political articles from Main Street media aren't helping expose their faults.