Comments on: Head and Shoulders Now Forms on SP500 with Rising Wedge Break

By: Mark

Mark — Fri, 24 Apr 2009 21:33:29 +0000

People looking for a head and shoulders pattern are simply deluding themselves given the fact that even if it occurs, the “neckline” is so far away from here that it renders such a view as absurdly untradeable.

By: blues

blues — Fri, 24 Apr 2009 13:00:12 +0000

Don-Da-Mon, well, for your info, this H&S has become a pennant and yes like you said, it might pop up, since pennnt is continuation pattern…

By: Don-Da-Mon

Don-Da-Mon — Fri, 24 Apr 2009 11:30:38 +0000

Corey, can you consider and explain how the current charts are just a “simple sideways consolidation” and when a break upward might occur? What differentiates it? Does it match the current situation? What target? It just seems like the bulls are going to make this go higher … to the 200 MA … so when? And what resistence upward would exist? With everyone looking for lower targets … what would be upper targets?

By: DaveB

DaveB — Fri, 24 Apr 2009 05:08:07 +0000

The odds definitely favor downside here… we’ve got the bearish rising wedge, momentum divergences, h&s top, and what appears to be a lower high put in this week.

But the bulls have been getting beat up for the past 18 months. For 18 months buying dips has been the wrong thing to do. So maybe it’s time for that to change. If the bears can’t break the cradle and make a lower low here then a lot of people will be left scratching their heads.

For the record I am short. But I’m not expecting new lows now, just a deep retracement and a resumption of the uptrend. If we take out the highs around SPX 860 I will hedge my shorts, if we take out 875 I will exit my shorts completely. I choose to hedge because this market has been whipping everyone around lately and I don’t want to get taken out of my positions on a false break.

By: blues

blues — Fri, 24 Apr 2009 02:46:19 +0000

Corey,

I originally thought that too, but I’m more side with MT, it looks more like a dimond rather then H&S… But either way, I think bull might have a chance to pop all these bearish formation and kill all bears… reason being, A PERFECT H&S need volume confirmation, where the left shoulder have the biggest volume and then volume lower as it build the head and the right shoulder should have the least amount of volume… But looking at the volume, it does not confirm H&S pattern… so I guess rather then all these bearish formation (bearish rising wedge, H&S, Dimond top), maybe is just a simple sideway consolidation before another pop up… (fu.. I hate bulls, they should all get their head chopped)

Although, after the pop we may be a head fake out and then all the bull really get their head chopped… haha

Anyhow, maybe people (including TA) are fairly bullish now because we’ve spent too much time below 200SMA and now they are doing a “reversion to mean” trade. So yes, is possible that spx can go back to 900s or even 1000s, just a tade above the 200SMA and get all bulls excited and then…. CHOP CHOP CHOP… off with their heads…

By: Andrew

Andrew — Thu, 23 Apr 2009 22:22:38 +0000

I actually sent out a 2 hour chart yesterday where I pointed out a possible head and shoulder. (I will email it) I am trying to get the proper time frame down for my analysis versus trading horizon. Unfornatley, I am not able to day trade (the 9 to 5 and capital req)but try to play a 2-4 day developments. These are quite challenging due to the time it takes to develop. I have trading some credit spreads as the time works in my favor.

Also, had some questions about the CMT. (email)

Congrats on your designation.

By: Andrew

Andrew — Thu, 23 Apr 2009 22:14:24 +0000

Corey,

By: Corey Rosenbloom

Corey Rosenbloom — Thu, 23 Apr 2009 21:00:53 +0000

Tom,

Good call! I’ll try to post that either here or via Twitter pics.

By: Tom

Tom — Thu, 23 Apr 2009 20:45:37 +0000

Drawing a trendline from the head to the right shoulder might give you a good short entry point if price touches the trendline, which it looks like it probably will tomorrow.

By: Corey Rosenbloom

Corey Rosenbloom — Thu, 23 Apr 2009 20:14:53 +0000

Haha it just leaves you scratching your head.

It’s not just Elliott people, it’s those who follow classic TA patterns – like the Head & Shoulders (here), Rising Wedge, Rounded Reversal, etc.

But any form of analysis gives you probabilities, never certainties and in the end price (supply and demand) rules the day. That’s why we don’t load up our entire account on a position and toss the dice on our analysis – risk control/position sizing is the key to long-term success.