Long Term Head & Shoulders Top on IWM

This pattern looks somewhat similar to the head & shoulders top (H&S) I saw on the Dow Jones a few weeks back and the scale of it is similarly disturbing. The Russel 2000 (IWM etf) has recently been carving out what looks like a perfect right shoulder, completing a H&S that has been in the making for over two and a half years. Using a neckline at roughly $66 and a peak near $86 you get a price objective thats $20 lower. Thats a 30% drop from here which would be 47% drop from the all time high. This is where even the most confident technical trader takes a step back and questions the validity of the target. What economic conditions would lead to a 50% drop in the value of US small businesses? What effect would such a huge destruction of wealth (stock value) have on the US economy? It sounds like a doomsday scenario. You can be more conservative and some technicians, see Bulkowski, modify this objective (from the measure rule) by including his statistical performance. Bulkowski found that 55% of H&S patterns meet their price target so we multiply the move by .55. His target would then be 66 - .55(20) = $55 so even the most conservative analysis will give you a price objective far below current prices should IWM break the neckline. It should be noted that Bulkoski's statistics rank the H&S top as the #1 pattern based on performance, so its a reliable pattern.

On a side note, I think its very interesting that there is a more appropriately sized H&S top at the very peak within the head of the long term H&S. Furthermore, you also see a H&S top at the peak of the right shoulder. These are patterns within a pattern, self similarity! Its really a thing of cataclysmic beauty.