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Chart Patterns Suggest Pullback at Hand

Again, the stock market's steady march higher was all traders could talk about on Thursday.

Well over 75 percent of S&P 500 stocks are trading above their 26-week moving average, according to Thomson Reuters data. The index has finished higher on six of the last seven trading days.

"We've had a very strong run without a meaningful pullback, and a lot of people would feel like chumps for buying before we see some kind of dip," says Nicholas Colas, chief market strategist at the ConvergEx Group in a Reuters interview.

If chart patterns are any indication, the pullback so many investors are looking for is about to come – at least in some areas of the market.

Small Caps

According to Oppenheimer technical analyst Carter Worth things don’t look good for the Russell . “The current move from the October 4 low takes the market right now at a past top,” says Worth.

And the first time the market challenges a level of such strong resistance it usually pulls back. “Memory kicks in – people who bought poorly become interested sellers – and people who bought well at the bottom want to book gains.”

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TJX

Looking at TJX as a single stock story, Worth tells us gains are no longer sustainable. “Think of it as too much of a good thing. It’s made a mature intermediate move in the context of a multi-year advance. It’s now 2 standard deviations about 150-day."

In other words, it’s a crowded trade.”

Symbol
Price
 
Change
%Change
TJX
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Gold

Worth really doesn’t like what he sees in the chart of gold. He calls the pattern ‘a kind of topping out.'

"We had a bit of a blow-off top reached last August when gold hit almost $1900 and since then it’s been lackluster. Our work suggests gold is in the throws of coming apart," he says.

Symbol
Price
 
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%Change
GOLD
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Trader disclosure: On Feb. 9, 2012, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders: Terranova is long VRTS; Terranova is long TBT; Terranova is long IBM; Terranova is long EMC; Terranova is long AXP; Terranova is long TRLG; Terranova is long AAPL; Terranova is long SNDK; Terranova is long MCD; Terranova is long OXY; Terranova is long FXE; Terranova is long CNX; Terranova is long SBUX; Terranova is long SU; Terranova is long CSCO; Terranova is long UNG Puts; Najarian is long AAPL; Najarian is long BAC; Najarian Is long JPM; Najarian is long CSCO; Najarian is long EMC; Najarian is long VMW; Najarian is long AAPL; Najarian is long DMND; Najarian is long CIGX; Najarian is long CBOE; Najarian is long CME; Finerman’s fund is long BAC; Finerman’s fund is long JPM; Finerman’s fund is long IBM; Finerman’s fund is long HPQ; Finerman’s fund is short SPY; Finerman’s fund is short MDY; Finerman’s fund is short IWM

For Mike Khouw
No disclosures

For Gerard Cassidy
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For Jerry Howard
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For Tim Ramey
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For Carter Worth
No disclosures

For Dan Dicker
Dan is long UPL



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Symbol
Price
 
Change
%Change
S&P 500
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IEV
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TJX
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