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Monday, April 23, 2012

Do or Die: April 23, 2012

UPDATE:  10:20 AM

Just like life, there are degrees of certainty in H&S patterns.  The first is completion of the pattern -- a touch of the neckline.  Done.  In order, the next degrees are: (1) a decisive move below the neckline, (2) a close below the neckline and (3) a back test of the neckline; and, (4) reaching the nominal target.

For this reason, investors who missed the initial decline I forecast should get another shot if/when the pattern back tests (the strongest ones don't, as we were reminded last July.)  The most logical spots for the bounce would be horizontal support at 1357, followed by the 1.272 of the smallest (yellow) Butterfly pattern at 1347.76.

Pushing through 1340 will also take some doing, as it complicates various wave counts -- humbling both bulls and bears whose scenarios need reworking.

All of the above assumes we close at or below 1363.  If there's a stick save (Fed or otherwise) we'll revisit the road ahead.  Otherwise, my target of 1305-1317 remains -- although we could technically approach the Oct 27 high of 1292.66 without too much difficulty.
Like the H&S pattern, my confidence in the analog is progressing.  The solid purple line above, charting the expected market movements, hasn't changed since I first drew it back on the 9th.


The head & shoulders segment of the analog we've been watching is within a few points of playing out on the e-minis.   An SPX completion comes at about 1363-4.

As a reminder, the alternative case is that we come close but don't quite complete it.  A hard bounce here at the neckline would likely send SPX up to that apex target of 1462 without all the theatrics in-between.

If the H&S does complete, look for an initial downside of 1347.76 with a possible back test to the neckline, followed by a decline to our 1305-1317 target.

More later.


  1. we pierced through 1363, does  that mean the 1305-17 scenario is in play now?

  2. I've just started digging into harmonics (thanks to your inspiration).  Any thoughts on a possible gartley on the SPX hourly chart...?

  3. Good call, although you're looking at a Bat -- slightly different from a Gartley in that the Point B can be .618 or less (Gartley requires right at .618) and a completion at the .886 rather than the .786.  In this case, the .886 was 1361.41, so we exceeded it a bit at 1358.79.  Still, it's useful in identifying a potential spot for the backtest of the little yellow channel (or flag) we were watching.