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TECHNICAL PERSPECTIVE: THE POSSIBLE HEAD AND SHOULDERS

12 June 2010 by Guest 6 Comments

By Decision Point:

I have been getting numerous questions regarding the possible formation of a head and shoulders formation on the S&P 500 Index chart. It is visible on the daily chart, but I think the formation is clearer on the weekly chart, and I have annotated where the components of the formation are located.

So, yes, there is a possible head and shoulders forming, but I think it is a little early to get into serious discussions about it. I only do so because it seems to be generating a lot of curiosity. We need to see a rally to about 1150, then a decline that heads back down toward the neckline. At that point we can start speculating about minimum downside projections, etc.

Chart

I should say that, whereas wedges (ascending and descending) are some of my favorite technical formations because they are so reliable in the way they resolve, the head and shoulders is probably my least favorite because they suck up a lot of oxygen as people discuss them developing, yet it is my observation that they have a low rate of fulfilling expectations.

At the present, I am more entranced in whether or not prices are going to hold above the support of the potential neckline.

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Comments
  • boatman

    i am intranced with neckline support too, from fundamentals and supported by TPC’s tone……..and everything about this whole debacle tells me we visit 6500 again sooner or later……and not just for a day.

    but a lopsided shoulder could extend out to october,historic graveyard of markets, if so i am sure it will be choppy, full of trading points.3 months of predictable chop would work.summer’s heat can help predictablity.

    TA prof. at the college says otherwise.looks for a quick shoulder….then………….

    06/12/2010 at 8:48 AM
  • jd

    Take a longer-term perspective. Left shoulder = 2000 top. Head = 2007 top. Right shoulder = April, 2010 top. Very bearish.

    06/12/2010 at 12:14 PM
    • Johnny`

      I don’t think that that makes a good left shoulder though, and the time doesn’t really match up in the pattern.

      06/12/2010 at 5:00 PM
  • Johnny`

    I agree that ascending and descending wedges are the most reliable technical patterns for resolution.
    That’s why it makes me happy to see an ascending wedge on gold. It’s way overvalued anyway.

    06/12/2010 at 4:59 PM
  • forcast

    Hello
    The shoulder head shoulder is much too obvious, the market will choose another optionqui will surprise the majority of traders

    06/12/2010 at 5:20 PM
  • Oscar

    This is reminds me of the H&S pattern back in July 2009. It was small and was being touted. It turned out to be a failed pattern and the market surged.

    That was then this is now. Just pay attention and don’t try and predict, let the market lead the way.

    It’s an election year so anything is possiable.

    06/13/2010 at 7:55 AM