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In 1929, probably the most famous of all stock market tops, the top was identified by a rare Broadening Top pattern, also known as a Megaphone, shown below. It was characterized by a long rally into its point a, and an extending rally into its point e. Waves b, c, and d were relatively short. This is the exact pattern we see in a chart of the Dow Industrials from 2002 through 2006. The entire rally from October 2002 has in effect been one very large Broadening Top Megaphone pattern, identical to the shorter time-frame pattern that led to the 1929 stock market multi-year clobbering. The second chart shows another major stock market top in 1957, once again earmarked by a Broadening Top pattern, with expanded rallies into waves a and e. It too led to a clobbering once completed.
There is some guidance as to when the top is in from these patterns. In both instances, 1929, and 1957, prices peaked at the upper boundary line after drawing the upper boundary line an exact symmetrical angle mirroring the lower boundary line — which was drawn using declining turn points. That would suggest a top around 12,500ish if a top is coming over the next month, or higher if this pattern wants to complete in December or early 2007. Point d is not below point b in the 1929 chart, as is the case in the 2002-2006 chart. It is below point b in the 1957 chart, so where point d lies does not seem to matter.
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