Traders Corner   2 comments

SPX(hat tip to Stockcharts.com for the chart)

Looking over the S&P 500’s chart, I noticed two head-and-shoulders patterns surrounding the all-time high of 1709 at the beginning of August:

1. Far-left shoulder: 1687 (May 22).
2. Closer left shoulder: 1698 (July 23-24).
3. Head: 1709 (August 2-5).
4. Closer right shoulder: 1700 (August 8).
5. Far-right shoulder: 1689 (September 11-12)?

The neckline for the closer shoulders shows in the 1680’s area (look at the lows from the end of July and in early August). However, the neckline for the far shoulders is harder to assess, because the left shoulder dropped all the way to 1560 (June 24th), and the low leading into the far-right shoulder is 1627, nowhere close.

On the other hand, this could be a false far-right shoulder. For the wider pattern to form, the S&P 500 would have to drop to around 1560, then come back up to around the 1690 area, before dropping back down to about 1401. Of course, if the current pattern is a true head-and-shoulders, the best estimate for the neckline would be around 1627 (August 28th’s low), which would mean the fall would be “only” to 1545.

Keep in mind that head-and-shoulders analysis is very iffy, due to the subjective nature of it. But considering that this pattern coincides with an expected tapering of the Fed’s QE next week, I would recommend extreme caution (and a large cash position) for the near-term.

One other technical note: The Williams %R is still in overbought territory (-10). With S&P 500 futures in negative territory, the bias is clearly to the downside today.

The S&P 500 levels to watch today:

UPSIDE: 1684 (September 10th’s high), 1687 (May’s high), 1688 (top of the Bollinger Bands), 1689 (2 data points), 1698 (July’s high), and 1709 (August’s high and the all-time high).
LAST CLOSE: 1683.
DOWNSIDE: 1681 (September 12th’s low), 1678 (September 11th’s low), 1675 (September 10th’s low), 1672 (September 9th’s high), 1671 (50 day moving average), 1664 (September 6th’s high), 1659 (September 5th’s high), 1651-1656 (4 data points and June’s high and the 20 day moving average), 1640 (September 6th’s low), 1637 (September 4th’s low), 1633 (September 3rd’s low), 1627 (August’s low), 1622 (bottom of the Bollinger Bands), 1604 (July’s low), 1597 (April’s high), 1581 (May’s low), and 1573 (200 day moving average).

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Posted September 13, 2013 by edmcgon in Daytrading, Investing, Market Analysis, Technical Analysis

2 responses to “Traders Corner

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  1. Speaking of the S&P, why has it always finished the day with a spike up? What game is being played and who is doing it?
    Lightnin’

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