If you’ve been following the financial media lately, then you probably know that many stock markets reached new all-time highs this Wednesday.
But the longest bull market in history now has many analysts worried.
They are warning of a correction, a stock market meltdown, claiming that it’s impossible for the upward momentum to continue.
What they don’t know is that something completely different is on the horizon… a stock market melt-up.
When it materializes, it could propel stocks around the world to new highs and beyond.
My Favorite Stock Pattern Is Signaling “Buy”
While everyone has been focusing on the U.S.–China trade dispute, the Federal Reserve (Fed) rate hikes, and Trump’s latest Tweetstorm, a pattern has quietly appeared in the stock markets.
This is not just any random trading signal but one of the most accurate in history. I’m talking about inverse head and shoulders (no, it has nothing to do with dandruff).
Inverse head and shoulders is a bullish pattern consisting of three valleys and a neckline.
Valley one (the left shoulder) is followed by a lower valley (the head) and then a final higher valley (the right shoulder). The neckline is the line connecting the highest points of the two troughs.
Once the price breaks the neckline, the pattern is complete… and that’s when the big rally begins.
Inverse head and shoulders is now showing on indexes across the world. But the most significant one is on the Russell 2000.
That’s because the Russell 2000 includes only small and mid-size companies, and those are the engines of economic growth. Technological innovations typically come out of college kids’ garages, not big corporations’ boardrooms.
Moreover, these are not companies considered “Too Big to Fail,” making them more sensitive to macroeconomic risks.
Finally, the index consists of all types of industries: technology, housing, retail, and so on.
Meaning, again, this is more representative of the whole U.S. economy.
The Fundamental Picture Looks Just As Positive
Of course, this melt-up goes beyond trading patterns.
I always say that a positive fundamental picture must support stock chart signals for me to buy… and such is the case now.
Markets are having one of the best starts of the year in decades, yet the inflows into stocks are relatively small. This means a class of investors is still waiting on the sidelines and could rush back in at any moment, driving prices up.
The big catalyst for them to move likely will be the trade agreement between the United States and China.
However, if you’re planning to wait until then, you will miss the train.
Buy the rumor, sell the news… and the rumors coming out of Washington say the China deal is close to being finalized… meaning there’s not much time left to act.