Here are some long term chart patterns the major averages appear to be exhibiting. The Dow is developing a potential longer term Head and Shoulders pattern. The 1st Shoulder developed from 1999 through 2001 while the Head occurred with the October 2007 high. The 2nd Shoulder could develop anywhere between its current level and 11240. 11240 is the 61.8% Retrace from the October 2007 high to the March 2009 low.
The S&P 500 developed a similar pattern over a long period of time from the late 1960's through the mid 1970's. However after forming the 2nd Shoulder the S&P 500 never tested its Neckline as it traded nearly sideways for 3 years before eventually moving higher again through the 1980's.
Meanwhile the Nasdaq could to be developing a longer term Triangle pattern as the A Wave bottomed in late 2002 which was followed by a B Wave that ended in late 2007. Meanwhile the C Wave bottomed in March of 2009 which is now being followed by the D Wave. Once the D Wave ends then the final E Wave would occur to the downside to complete the longer term Triangle pattern.
The S&P Composite Adjusted for Inflation exhibited a similar pattern after the 1929-1932 crash as it developed a longer term Triangle pattern before breaking out to the upside in the early 1950's.
As far as the S&P 500 it formed a longer term Double Top pattern from 2000 through 2007.
Overall Double Top patterns have been a rare occurrence in the market. In fact going back to 1896 I have only found a few other occurrences similar to what the S&P 500 is exhibiting. The first occurrence was back in the mid to late 1960's as the Dow formed a Double Top pattern which was followed by a 37% drop. This was then followed by a slightly higher high by late 1972. However after the Dow peaked in early 1973 this was followed by an even bigger drop of 46% through late 1974. Meanwhile a second Double Top developed by 1976 which was then followed by a choppy trading range through 1982.
Another occurrence was way back in the early 1900's as the Dow formed a Double Top by late 1909 which was followed by a 28% drop. In this example the Dow didn't make a new high and peaked in late 1912 (point F) which was then followed by an even bigger drop from late 1912 through 1914 of 42%. As you can see the entire period from 1906 through 1921 was a big mess with volatile moves in both directions over a period of 15 years.
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