In yesterday’s post [see: Two Targets Down], I theorized we would go up and trace out a right shoulder to complete a small H&S pattern in the right shoulder of the larger (completed) H&S. So far, that’s exactly the way it’s playing out.
The 60-min RSI chart from May 8 forecast a back test of the solid yellow TL intersecting with the downward sloping yellow channel. We got that, along with a clear rising wedge in the RSI to go with the triangle in SPX itself.
From a timing standpoint, the ideal pattern will take 3-4 more days to play out — though there’s enough of a right shoulder now to consider it legit. The target looks to be about 65 points below wherever we break back through the neckline, probably around 1275 (1340-65=1275).
This is actually lower than the larger pattern’s target of around 1295. I favor 1295 simply because I think the bulls will throw a fit if we threaten to take out the 1292 October highs. Some of you more savvy Elliotticians know better than I what turmoil that would bring to the bullish case.