2nd Time a Charm?

UPDATE:  11:30 AM

I feel pretty good about my downside (primary) case now that things are moving along.  I mentioned back on April 25 [see: The Bulls Fight Back] that we needed to start down by Wednesday in order for the larger H&S to maintain some time proportionality between shoulders.  We got our reversal Tuesday, and have been moving down since.

Also, check out the RSI and MACD on the chart below.  RSI broke the little fan line I threw up a few days ago, and has no support until it hits line k-5 — presumably below 1370.  MACD just saw a bearish cross and is approaching the center line.  Note, also, that SPX has fallen below its 10, 20 and 50-day SMAs.  The only remaining moving average to offer support are the SMA100 (at 1342) and the 200, way down at 1276.

I’ve already seen a few Fed comments, talking up the economy, employment, etc.  And, SPX is pausing here at the neckline.  I assume that even the most fundamentally oriented and/or manipulative powers that be have a smart technical analyst on staff who explains to their bosses what happens when various patterns play out.

So, there’s always a struggle at key moments like this. It’s interesting, all the same, that if we look very hard at all, we can find chart patterns that provide rationale for the price movements.  Here, at the neckline, we can see that RSI has also reached a midline of sorts in the channel we’ve been following.

If we break the neckline, look for that back test somewhere around 1365 mentioned below.  After that, not much support till 1340, and then 1323.

UPDATE:  11:15 AM

Here’s the big picture, again.  The larger H&S, which completed but didn’t play out on Apr 23, is back in play.  If we can close beneath 1370, we’ll have a crack at a complex H&S pattern (two shoulders on each side) that targets the low 1300s.

The harmonic picture supports this, by the way.  If the H&S plays out, the little Bat pattern (yellow) under construction becomes a Crab pattern.  These typically extend to the 1.618, but can go further (2.000, 2.24, 2.618, etc.)

The larger purple pattern – a Butterfly – completes at 1317 (the 1.272) or 1289 (the 1.618.)  Hence, my call for a downside of 1295-1323.



The Bat, Crab and H&S patterns are doing their thing, and we’re fast approaching the target we set yesterday of 1372. That was an interim target of course, because if we complete the larger Head & Shoulders target (again), the potential downdraft is to 1295-1323.

I’m refining the larger H&S completion target to 1370.73 and the nominal target to 1300.

The .886 Bat pattern retracement of the 1358-1415 rise from Apr 20 to May 1 indicates a turn at 1365.23.  So, if the pattern is to play out, that would be an excellent place for a back test to commence.

Of course, TPTB will attempt to turn it again.  Cue the talking heads, or QEeak from deep inside the Fed that will attempt to turn the tide before it’s too late.




2nd Time a Charm? — 18 Comments

  1. Pebble, What do you think the chances are we bounce at this neckline and a retest of the 1388-1392 support/resistance to form yet another H&S with a target of 1340 thus confirming the larger H&S to take us down to 1300-1290? Is one H&S confirming another and another common
    and you seen something like this before? 

    • Not a bad thought.  The shoulder line is pretty well established, and we know they’re pulling out all the stops.  I think it’s a good alternative — IF they can stop this here as they did before.

  2. Thank Pebble.  Hedged the shorts at 1370 level per the 1372 you pointed out recently.  If the hedges get stopped out, then we have another waterfall beginning.  If they pump it up, I’ll take the swing trade in order to get short again on the backtest.  Great stuff!

  3. Great commentary.  Any chance you could downsize the charts when you post as one (at least I) have to click on them to open in another window to view the full chart. 

    •  Not sure I understand.  I try to make them large enough so they’re somewhat readable in moderate detail as is, but can be expanded with a click if more detail is desired.  Is this not working for you?

      • Maybe it is my browser, but I can only see about 2/3 – 3/4 of the chart as the page is currently configured.  I have to click on the chart to open in a new page and then toggle back and forth.

        • That’s not ideal.  What kind of computer/monitor are you on?  How about everyone else?  Anyone else having the same problem?

          • Not having trouble here with seeing the whole chart.
            I open the charts in a new tab which works well for me.

              • I have a 16:9 Toshiba laptop that is set to 1366 x 768 resolution and I can see the entire chart embedded in the webpage.  It isn’t big enough to get the details, but I can see the highlights and then the new tab allows me to really dive into the info I want to inspect closely.

                Went home hedged since they closed it basically sitting on the neckline.  Harvested half my EUO position though to lock in some profits.

  4.  because if we complete the larger Head & Shoulders target (again), the potential downdraft is to 1295-1322.
    I am not clear about what, complete the larger Head & Shoulders target, means. Are you talking about a break now straight under 1372?