TP&tDH

Hat tip Doug Kass
 

 

Some friends who are technicians are all hot & bothered by the above 3 Peaks and a Domed House pattern.

As I have said in the past, I have no idea what the long term track record of this pattern is is;  I saw some good calls of TP&tDH in 2000, and bad calls of such in 2003 and 2005.

I present the above chart without opinion other than to say it is interesting.

 

 

Previously:
3 Peaks and a Domed House ? (October 24th, 2003)

Three Peaks and the Domed House redux  (December 3rd, 2004)

See also:
Three Peaks and the Domed House – Revisited, Barclay T. Leib, Sand Spring Advisors (January 14, 2000)

Category: Markets, Technical Analysis, Trading

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

25 Responses to “Three Peaks and a Domed House (2012 version)”

  1. peachin says:

    somethings override T/A … “We are in a period where the $VIX is moving through a period it hasn’t seen in 3 months… we are in uncertain times (times 2x) Apple can drive the market alone… we’ve seen it more than several times. At this time MSFT is probably one of the best long term shorts – 3 to 4 Trillion $$$, on a per year basis, is seen in the next year to move into Technology – Worldwide. JC Penny and Target are selling assets to hold on to a failing business model – (thank god I don’t have to make decisions for WallMart!) Hand held Hardware is being challenged by Competition – that’s where the consumer is going… 3M Did OK… wall street’s premature ejaculators always see doom and gloom in “uncertain times” Thank God for the “Contrarians” who see these times as a buying opportunity. The high frequency traders are awaiting the “day traders loaded with margin” to lose their asses…. 3 peaks and a Domed House,… Huh?

  2. Mike in Nola says:

    Typical technical indicator. Looks interesting, but how can you know until it’s been studied so much that it’s not useful any more?

  3. techy says:

    but Vodoo is real :)

  4. peachin says:

    “Fiscal cliff” is the popular shorthand term used to describe the conundrum that the U.S. government will face at the end of 2012, when the terms of the Budget Control Act of 2011 are scheduled to go into effect.”

    The Fiscal Cliff is nothing to worry about… It’s there as part of change that is necessary… Now which way to go as we approach it – Austerity will cause a depression… Increase Gov’t spending (are you kidding? – no!)
    irrespective of Tea Party and their republican dummies – will need – tanker loads of Kopectate – if they proceed with their plans….. So, Romney Wins, maybe, and the “ship goes down!” No?

  5. Julia Chestnut says:

    As God is my witness, I read “Three peaks and a doomed house.” Totally different technical pattern, LOL.

  6. peachin says:

    Thanks in advance, Barry….. and finally, Yes China will haul their own ass out of the fire… Australia will be the first to benefit… and that is where my holdings are – 3 peaks and a domed house, indeed!

  7. ben22 says:

    “Looks interesting, but how can you know until it’s been studied so much that it’s not useful any more?”

    Mike in Nola,

    curious if you’ve ever asked yourself that same question about fundamental analysis? Lots of fundy folks out there that have “studied p/e ratios for a long time”…..as one of many examples. Also, not to be too nit-picky but this is not an indicator, its just an observation about price. Indicators are typically derivatives of price in the technical world such as RSI or the MACD.

    Anyway, to follow up on this post, here is Tom DeMark on CNBC yesterday….check out that list of people that also apparently have some interest in voodoo, like Steve Cohen and George Soros, who are clients of his.

    http://video.cnbc.com/gallery/?video=3000124309&play=1

  8. TRI has been predicting a crummy Q3 GDP since Memorial Day. On Friday BEA will probably announce it was a mere 0.4% pace. This plus the guidance warnings and misses are ingredients for a pause in the markets, but TRI has always said Q3 is the trough … not a trajectory presage.

    The delayed public chart reveals the fiscal cliff was not a concern back in June. TRI’s forward outlook updates do not sense the outcomes expressed via the faux rage by pundits of things to come…

    TRI chart: http://trendlines.ca/free/economics/RecessionIndicatorUSA/USA-TRI.htm

  9. mathman says:

    Hey, lookie how smart the thinkin’ is in PA!:

    http://www.shalereporter.com/industry/article_fcd5b9cc-1a35-11e2-9cdc-0019bb30f31a.html

    i mean, what could go wrong?!

  10. PeterR says:

    Look for a bounce near SPX 1400 IMO, then a rally up for another “shoulder” of some sort.

    Whatever happens in the next day/week/month, 1400 and MA(100) are important support, below which is a canyon of hurt.

  11. Lariat1 says:

    @Julia Chestnut: I read doomed house also TWICE!!

  12. bobnoxy says:

    Do their tarot cards and Ouija board concur?

  13. Futuredome says:

    .4% pace lol, not even close Hutter. Your to much into globalism. Yes, even the US economy still has internal economics unrelated to globalism. Capital flows show growth anywhere from 1-4% annualized for the 4th quarter and 3-7% so far for the 4th. We will find out in 10 years(shows how worthless GDP reports are). The US does well with this type of global disinflation.

    FWIW, the commodity bust may “finally” be near. I could see prices drop 20% in one day closing in. China can’t grow where they want near fast enough and the rest of Asia is no different. Oil imports are vastly slowing. Time for the commodity bust to happen to expose we are in deflation. Without commodity inflation, there is no inflation.

    My guess China revises down their growth to 6% for 2013 will be the final blow to the primary dealers. They will bail out of commodities big time.

  14. drtomaso says:

    But do we have the dreaded black swan formation, as seen in 2008?

    http://www.elitetrader.com/vb/printthread.php?threadid=128320

  15. lburgler says:

    On a long enough timeline, everything is practically nothing, or something like that.

  16. The problem with this pattern is that even when proven right it does not tell us:

    a) how much decline to expect.
    b) how much time the decline is likely to last.

    So there are no indications as to how to take profits.

    Furthermore, at least I am not aware of it, there is no statistical record to have some idea as to the percentage of winning versus losing trades following the pattern. While such percentages are not carved in stone, they serve us in gauging the odds.

    And if the pattern fails it does not tell us when to get out of the trade (short in this case).

    All these issues are addressed by the Dow Theory and other tools of TA.

    Regards.

  17. carleric says:

    Given central bank meddling in the markets, I am not sure that either TA or Fundamentals can be used….a pretty bright guy I know thinks you should search out money printing beneficiaries and look for possible opportunities there or….drink more and work less.

  18. ben22 says:

    @Dow Theorist

    I’m going to have to click your link one of these days :-)

    anyway, this particular pattern has been around for over three decades now. Bulkowski, as is the case with most patterns, has probably tried the hardest to catalog it:

    http://thepatternsite.com/3peaksdome.html

    I’m not big on pattern trading myself and this particular pattern’s complexity lends itself to more subjectivity than may be the case with other, more basic pictures of supply and demand. The dates of the pattern in the dow jones are listed there on the site but as you seemed to have figured out the sample size is extremely small and as such the trading record is suspect to begin with.

    Also, regarding the percentage of winning to losing trades…a more important guage I would argue is the percent gain on winners versus losers in a trading system. I’ve seen many trading systems that have a win ratio in the 40% range but given good risk control and the fact that winners may eclipse losers by a ratio of more than 4:1, they create fantastic long term track records. Less common is the flawed system that produces more winning trades than losing trades due to a few losses being so large that they overcome the gains.

  19. ben22 says:

    Less common is the flawed system that produces more winning trades than losing trades “but” due to a few losses being so large that they overcome the gains.

    someday Barry is going to have that edit key capability, I just know it

  20. [...] The Big Picture passes along a suggestion that the S&P may be forming a “3 peaks and domed house” pattern.  What is that?  I don’t know, but here it is. [...]

  21. @ben22

    Thx for your link which I have read. As you say I find the sample size too small. Maybe it is a wonderful pattern, and I am full of “dow theory” biases that cloud my judgment.

    You are right. Percentage wins is not the best indicator, but how much you make when you win versus how much you lose when losing. I was not accurate enough in my writing. Profit factor is what counts. However, if the average win is larger than the average loss and, in addition to this, you have a high percentage of winners, you are close to nirvana investing. This is precisely what the Dow Theory accomplishes for those investing along the primary trend: ca. 70% winners with an average win of ca. 25% and 30% losers with an average loss of ca. 10%. This numbers result in a profit factor above 5, which is outstanding. I am still working in systematizing these figures, but they are a quite accurate.

    Regards.

  22. ben22 says:

    @Dow Theorist

    Indeed, I have a lot of respect for the dow theory. In its traditional form I would always hear people remark that the dow theory was “slow”….and there is of course some truth in that

    but I always thought of that as an advantage rather than a disadvantage

    nobody has to pick THE top and THE bottom in order to make money in markets

    the long term record of DT speaks for itself, its a fairly simple form of analysis in its most basic form (you don’t need a football field size research team to monitor it) and it crushes buy and hold “over the long run”

  23. SolarMan says:

    Three Peaks and a Domed House confirmed by 75 to 78 months cycle in stock market

    That cycle was present in major tops or bottoms
    03 2009 crash low was related to:

    07-1932 low by 918 months (12 cycles of 76.5 months)
    03-1938 low by 847 months (11 x 77 months)
    10-1957 low by 616 months (8 x 77 months)
    05-1970 low by 464 months (6 x 77.33 months)
    07-1996 low by 154 months (2 x 77)

    10-2011 low was related to:

    9-1934 low by 924 months
    9-1953 low by 693 months
    9-1960 low by 616 months
    10-1966 low by 539 months
    10-1998 low by 154 months
    5-2005 low by 77 months

    10-2007 top related to:
    9-1929 top by 937 months (12 x 78.08 months)

    September- October 2012 top related to:
    09-1929 high by 996 months (13 x 76.6 months)
    03-1937 high by 906 months (12 x 75.5)
    04-1942 low by 845 months (11 x 76.82)
    11-1961 top by 610 months (8 x 76.25)
    10-1974 low by 455 months (6 x 75.83)
    04-1981 high by 377 months (5 x 75.4)
    08-1987 high by 301 months (4 x 75.25)
    01-2000 high by 152 months (2 x 76)

    11-1961 top correlates nicely with current rotations
    10-1960 low + 610-612 months = 09-2011 low
    06-1962 low + 610-612 months = April- June 2013 low that’s were Super Long Term Delta has projected low

    Too bad cannot post the chart but this is closest I can get from internet

    http://www.mrci.com/special/wspi61.php

  24. @ben22

    fully right. Nobody can predict the exact top or bottom, and this is a good thing. The Dow Theory tends to be more responsive than moving averages, so it does a pretty good job at timing. Furthermore, Dow Theory is not “optimized” (i.e. 200 days MA). If self-adjusts to market conditions.

    More performance and less risk when the going gets tough…look at the crash of 1987 or 2008-2009

    I appreciate the civility of this blog.

    Regards.