by Jesse Colombo
After the sharp early-February market correction in both U.S. equities and crude oil, traders and investors have been racking their brains trying to figure out what the next major market move will be – will it be another leg down or a return to the late-January highs? As a result of this back-and-forth debate, the major U.S. stock indices and crude oil have been tracing out triangle patterns, which are consolidation chart patterns that indicate another major move is likely ahead upon a breakout or breakdown from the pattern. What makes these patterns particularly interesting is the fact that they’re occurring in both equities and crude oil, which are correlated with each other.
Here’s the triangle pattern in the Dow Jones Industrial Average:
Here’s the triangle pattern in the SP500:
Here’s the triangle pattern in the Nasdaq 100:
Here’s the triangle pattern in West Texas Intermediate (WTI) crude oil futures:
Here’s the triangle pattern in Brent crude oil futures:
The ultimate direction that these triangle patterns break-out (either up or down) are likely to determine the next major market move. Ideally, the breakouts in stocks and crude oil should confirm each other, versus breaking out in different directions, which would increase the odds of failure of both breakouts. It is also worth noting that the “smart money” or commercial futures hedgers are very bearish on crude oil, which increases the probability of a breakdown (but confirmation is needed, either way). Stay tuned for future updates when a breakout eventually occurs.
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Jesse is an economic analyst and Forbes columnist who was recognized by the London Times for warning about the U.S. housing and credit bubble as a university student. Jesse continues to warn about dangerous post-2009 economic bubbles and has over 100,000 social media followers. Jesse graduated with a Bachelor of Science (cum laude) from Stony Brook University.