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Monday, August 17, 2009

Tracking the $SPX

First up is a longer-term chart of the $SPX, showing once again the inverse head & shoulders patterns (one nested inside the other) and how they have played out thus far. As the long-awaited correction gets decisively underway today, it will be important to gauge stock and market action at key support levels. Our first (smaller, interior) inverse head & shoulders pattern corrected in textbook fashion to its neckline support before continuing higher. Now we're watching to see if the larger, exterior pattern will follow suit. How the benchmark index handles a test of its neckline support in the 960 area will be critical in determining what lies ahead in the near to intermediate-term for this market.

The second chart shown is a 30-minute chart of the past two weeks, and illustrates a short-term bearish head & shoulders pattern that violated the neckline today. The resolution target of this pattern coincides quite nicely with the critical support zone in the 960 neighborhood.

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