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Thursday, May 3, 2012

New Head & Shoulders Pattern

~reposted from

UPDATE:  2:20 PM

SPX traded through the small neckline and seems quite content to pause at the small fan line I posted about this morning.  It’s line k-4 on the chart below, and just so happens to correspond to the SMA 10 on the daily chart (1390.81.)

In H&S patterns, neckline breaks are often followed by a back tests.  If the NFP print in the morning is lousy, we should head down to 1372 pretty quickly.  If the numbers are great (or the market perceives them as guaranteeing another round of QE), the pattern will bust.

UPDATE:  1:15 PM
Be cautious with this smaller pattern, though.  The 60-min chart shows a distinct possibility of a bounce at the neckline (as happened with the larger pattern.) Focus on the bold, yellow TL on the RSI below.  I would suggest anyone considering piling on shorts protect themselves, as always, with tight stops.

UPDATE:  12:30 PM
Over on the right shoulder of the Head & Shoulders pattern we’ve been watching is a… H&S pattern.  It would complete somewhere just below 1394 and targets 1372 — the (wait for it…) neckline of the larger pattern.

Ever get the feeling the market is just toying with you?  Seriously, though, this fits rather well with the RSI indicators, which as I posted earlier, support the idea of another test of the neckline.


If we get crazy positive non-farm payroll numbers in the morning, all bets are off.  Barrons is reporting consensus estimates of 165,000 (below), while estimates 140K.

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