Either the H&S pattern is about to break or, as I rather suspect, the back test is just about complete. Note the bold, purple TL on the 60-min RSI (ignore the rest — too confusing to translate from the daily chart.)
As I suspected, the 60-min RSI gave us a decent reversal signal when it tagged the TL off the August lows (the lowest horizontal line.) As we discussed in the earlier post, the key is whether we can close beneath the neckline, currently around 1364. Don’t be surprised if we close right on it.
My gut is that it won’t be possible to stuff today’s plunge back into the “let’s pretend” box…too many H&S pattern completions, too many rational, reasonable, mainstream acknowledgements of the broken euro zone situation.
UPDATE: 8:45 PM
Another possibility that just occurred to me… ewtnewbie points out that under EW theory we should see an a-b-c corrective wave as our back test after 5 waves down we’ve traced out. I’ll buy that, though as most of you know I’ve long since given up trying to trade off EW. I do like the idea, though, of another H&S pattern on the right shoulder. Here’s how it could work…