In the wee hours of June 11, I pondered the possibility that the e-minis were forming an Inverse Head & Shoulder pattern [see: Big Picture.] I posted this chart, which showed that the target of such a pattern would be 76 points away from the presumed neckline — the exact same distance as the just completed orthodox H&S target from its neckline.
I’ve spent a lot of time lately agonizing over whether we’ll go back up and produce a new high. The harmonic picture suggests we’ll put in a lower high — a point C which, less than A at 1419 (on ES, 1422 on SPX), would get the party started to the downside.
I can only imagine the amount of good money bears would throw away on puts and the like, trying to anticipate whether it was going to be a .618, .786 or .886 retracement.
Once we approached 1420, though, the momentum would shift to the bulls and an enormous amount would go into positioning for the upside.
What if it were simply a double-top?
Well, here we are. The e-minis tagged 1420 about 45 minutes ago.
UPDATE: 10:00 AM
SPX completed its own “double top” just after the open.
This was as deep into the rising wedge we’ve been talking about as possible, and on the same day (but, not the same way) we speculated about last week [see: Moment of Truth.]
But, of course, it isn’t a double-top if prices keep rising. Currently, the daily RSI shows no negative divergence whatsoever (although it’s present on every shorter time frame.) If we blow through 1422, the upside targets are numerous.
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