Every technician is watching that H&S pattern on the S&P and the Dow.
By Daniel at 30 June, 2009, 7:30 pm
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Two technical events occured today.
First,the S&P bounced of six day uptrend support.
Second,after the bounce is stalled at the right shoulder resistance.
The question is which pattern will end up being dominant?
If the right shoulder resistance is dominant we will tumble tomorrow and restest 885,maybe tomorrow maybe on Thursday.
Normally the secondary indicators would help.On the daily S&P charts we have bearish divergences on the ROC - the RSI - The Money Flow index and most of the common oscillators.I happen to use the Ultimate Oscillator.
But the daily RSI is 51.15 - above 50 is not an encouraging sign for shorts.It has been trending down since May 6th when it was 73 - that’s your bearish divergence - but whenever this market’s RSI has been above 50 it has bounced off every selloff.
The stochastics are coming off an extreme oversold condition - also bullish.But they stalled at the 50 line and almost,but didn’t quite,cross bearish.
I am watching S&P 920.If we break above that level,particularly on good volume,930 is virtually in the bag.If we bust above 930,again WITH VOLUME,a double top of 955 is likely and the H&S pattern technicians are watching will be destroyed.
The Nasdaq plays a critical role in all this.IF the S&P AND the Nasdaq double top simultaneously that raises the probability of a summer correction.But if the S&P double tops and the Nasdaq makes a new high we could base and move towards the “magic number” - Dow 9088.
Max
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