It was a strong week in the markets, all over the world.  Here is a graphic that will show you how well everyone did.  It comes from FT.

So, while things are looking better, let's look at a chart of what's happening on the Dow Jones Industrial Average.

Dow's Down-trend Is Still Clear.

May and June were volatile months for the stock market. The Dow moved within a 1400 point range in May and an 800 point range in June. Over the last seven days, the Dow moved from 10136 to 9614 and back to 10136. Basically, we saw two 500 point swings in seven trading days.

The Dow's daily Rate-of-Change is shown int the indicator below the main chart,. It illustrates another form of volatility. Moves outside of the -2% to 2% range (marked by the blue line) were rare
from August to April. Notice how the Rate-of-Change dipped above 2% and below 2% numerous times since early May (marked by the pink highlight).

On the price chart, a falling wedge is taking shape. According to Arthur
Hill, these patterns sometimes denote a correction within a bigger
uptrend. However, they are clearly bearish as long as they fall. In
other words, the trend is down as long as the wedge falls. The Dow needs
to clear the April trend-line first, and then the June high, to reverse
this downtrend.

It was a strong week in the markets, all over the world.  Here is a graphic that will show you how well everyone did.  It comes from FT.

So, while things are looking better, let's look at a chart of what's happening on the Dow Jones Industrial Average.

Dow's Down-trend Is Still Clear.

May and June were volatile months for the stock market. The Dow moved within a 1400 point range in May and an 800 point range in June. Over the last seven days, the Dow moved from 10136 to 9614 and back to 10136. Basically, we saw two 500 point swings in seven trading days.

The Dow's daily Rate-of-Change is shown int the indicator below the main chart,. It illustrates another form of volatility. Moves outside of the -2% to 2% range (marked by the blue line) were rare
from August to April. Notice how the Rate-of-Change dipped above 2% and below 2% numerous times since early May (marked by the pink highlight).

On the price chart, a falling wedge is taking shape. According to Arthur
Hill, these patterns sometimes denote a correction within a bigger
uptrend. However, they are clearly bearish as long as they fall. In
other words, the trend is down as long as the wedge falls. The Dow needs
to clear the April trend-line first, and then the June high, to reverse
this downtrend.

It seems like there is a mighty long fuse on the real economic recovery.  We might be in for a longer wait than the recent rally led some to believe.

A record drop in pending home sales and a slowdown in the construction
market contributed to a sluggish outlook for the economy last week, and highlighting the significance of government stimulus measures and job
growth.

Market Commentary

The Nasdaq Composite Index is showing a well-formed Head and Shoulders topping pattern.  Price has broken beneath the neckline, which means it has triggered.  Unless it can move back above that level, the pattern's target is the distance from the top of the head (2500) to the neckline (2100), which is 400 points lower.

Supporting the bearish case, new 52-week lows are expanding on the Nasdaq while new 52-week highs are drying up. Net New Highs (new 52-week highs less new 52-week lows) is an easy way to assess the battle for new 52-week extremes. An uptrend is unlikely as long as Net New Highs remain
negative.

Technical Analysis is often easy to see after the fact.  Here is a look at several Head and Shoulder top and bottom patterns.  Click the image to see a bigger version.

Here's Something That Will Show-Up On Lots of Radar Screens.

On some level, Technical Analysis is a self-fulfilling prophecy because "everyone" is looking at the same thing.  While lots of people are worried about the Head and Shoulders pattern, I suspect that far more are watching the "Death Cross" or "Dark Cross" that is being formed on our indices as the 50-day moving average falls below the 200-day moving average.

While I see the bearish implications, some trader's will be looking for the head-and-shoulders and death-cross patterns to fail because of a short squeeze.  Failed patterns often result in bigger moves than the patterns that didn't work.  Here is an explanation about why that happens.

The OOPs Trade: 

When a well-known pattern fails, the response is often dynamic. This often happens with obvious, high profile situations like a "Head-and-Shoulders"
pattern, a move through big Round
Numbers (like Dow 10,000), crossing
the 200-Day Moving Average, or violating a clear Price Channel. Just for the record, several of those are in-play at this price level.

An often violent reversal happens when the crowd realizes that it was wrong, and people rush to cover their painful losing positions.  As the price of the stock increases, more short sellers feel driven to
cover their positions.  This is very similar to a short squeeze;
and the move is often violent and prolonged.

The markets are
oversold here; lots of people know that we just made new lows, and we
have been bombarded with bad news recently.  So, I'm not predicting that
the market will reverse here. I am just suggesting that it is
possible and something to watch.

It seems like there is a mighty long fuse on the real economic recovery.  We might be in for a longer wait than the recent rally led some to believe.

A record drop in pending home sales and a slowdown in the construction
market contributed to a sluggish outlook for the economy last week, and highlighting the significance of government stimulus measures and job
growth.

Market Commentary

The Nasdaq Composite Index is showing a well-formed Head and Shoulders topping pattern.  Price has broken beneath the neckline, which means it has triggered.  Unless it can move back above that level, the pattern's target is the distance from the top of the head (2500) to the neckline (2100), which is 400 points lower.

Supporting the bearish case, new 52-week lows are expanding on the Nasdaq while new 52-week highs are drying up. Net New Highs (new 52-week highs less new 52-week lows) is an easy way to assess the battle for new 52-week extremes. An uptrend is unlikely as long as Net New Highs remain
negative.

Technical Analysis is often easy to see after the fact.  Here is a look at several Head and Shoulder top and bottom patterns.  Click the image to see a bigger version.

Here's Something That Will Show-Up On Lots of Radar Screens.

On some level, Technical Analysis is a self-fulfilling prophecy because "everyone" is looking at the same thing.  While lots of people are worried about the Head and Shoulders pattern, I suspect that far more are watching the "Death Cross" or "Dark Cross" that is being formed on our indices as the 50-day moving average falls below the 200-day moving average.

While I see the bearish implications, some trader's will be looking for the head-and-shoulders and death-cross patterns to fail because of a short squeeze.  Failed patterns often result in bigger moves than the patterns that didn't work.  Here is an explanation about why that happens.

The OOPs Trade: 

When a well-known pattern fails, the response is often dynamic. This often happens with obvious, high profile situations like a "Head-and-Shoulders"
pattern, a move through big Round
Numbers (like Dow 10,000), crossing
the 200-Day Moving Average, or violating a clear Price Channel. Just for the record, several of those are in-play at this price level.

An often violent reversal happens when the crowd realizes that it was wrong, and people rush to cover their painful losing positions.  As the price of the stock increases, more short sellers feel driven to
cover their positions.  This is very similar to a short squeeze;
and the move is often violent and prolonged.

The markets are
oversold here; lots of people know that we just made new lows, and we
have been bombarded with bad news recently.  So, I'm not predicting that
the market will reverse here. I am just suggesting that it is
possible and something to watch.