Head and shoulders beheaded?

090714induReaders raise the question, do the last two days invalidate the head and shoulders?  Not at all.  The trendline from the top in June is intact, the pattern of lower highs and lower lows is intact and a few more days work on the right shoulder would add to symmetry.

In addition, remember that the Composite Operator likes to shake insecure traders  out of the trend before making a real move.  Sometimes it’s called the Specialist Trap, because Specialists like to play the trick.  If price takes out the high on July 1 then we’ll be concerned.

And, we have never considered that the neckline was definitively penetrated.  We’ll know when that happens.

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This Post Has 8 Comments

  1. sean.reynar@rbc.com

    Is this pattern not too small to be significant? The pattern above is too small at 8 weeks to be important. Is an investor or trader really going to blow out a portfolio because of a series of small little bumps?

    Doesn’t Magee’s writings suggest that to be meaningful a H&S pattern has to be big – and therefore only seen in weekly or monthly charts?

    Your comments?

  2. jeff160

    Personally, I think we’re trying to create a right shoulder/hand in a much larger kilroy bottom (sans last couple of days). The s&p would have to get to the 800-825 range if I’m reading correctly for this to occur, but it would be the next step in the potential H&S bottom pattern that starts in late Nov (left hand) & early Mar (nose)….just my thots.

  3. marvinho78@hotmail.com

    The last 3 days have produced two power bars that have crushed the bears…and i do mean crushed. Even if we blot out the news and hype from the mainstream media…this recent market rally off the march low has a feel of 2003 to 2004. On that note, it would be interesting to hear anyone who has any comment on existing direction of the markets? As an aside…Swing traders have been crushed since May and range trading/ day trading has been the order of the day…Could this move complete the right shoulder off the larger kilroy?

  4. alain

    NDX Broadening pattern with gap to be filled.
    The SPX futures did not exceed the July 1st 929 high.

  5. marvinho78@hotmail.com

    technically this huge kilroy is some 8months in the making, so if 8799 or therabouts is authoritatively taken out, its bullish purport would have to be given the benefit of the doubt…(ala 2003) seems the accounting rule change for toxic bank asset valuations is the great equaliser this time…

  6. alain

    happy to trade technically. The accounting rule is hot air. It does not make disappear or solve the problem but just shifts it for a while to be resolved later and probably more painful.

  7. marvinho78@hotmail.com

    so is anyone still short or now aggressively in cash? this last 3 months does polarise opinions but am keen to share others’ take on the technicals with the hand the market has dealt us. also, is the dollar consolidating or going to break down again?so far been sideways…worm or wyrm?

  8. WHC Bassetti

    As the posts indicate, and painful as it seems, the tide is running up. If you took many of the longs i talked about during this run it may be less painful. But the indices are long only with extreme paranoia — And remember, October (the witching month) is right around the corner. Personally we’re like a cat on a hot tin roof.

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