S&P Tests May Lows

Note the head and shoulders pattern in the S&P 500 Index (SPY) that has received much recent attention. The 20-day volume-weighted average price (blue line) that had acted as support during the rally became resistance during the recent upmove. Now we are testing the neckline of that head and shoulders pattern. Interestingly, I show 227 new 20-day highs among NYSE, NASDAQ, and ASE stocks today against 972 lows--fewer new lows than we saw yesterday. If those new lows don't expand with continued selling today, we could trap a few bears looking for a breakdown of that much noted pattern.

Comments

[Roger Knights:]

It benefits the gov't's. Treasury sales if investors get scared out of stocks.

Jul 08 04:29 AM

[jmorace:]

Hmmm, interesting point.

I have never seen a technical pattern so much bally-hooed. Bloomberg commentators, CAPS folks even CNBC anchor people are chattering away about neck lines and head and shoulders with such convincing authority. If this market tanks it will be the most discussed and predicted move I can remember.

Nice to see this could be a bear trap. It smells that way to me too. And today the market opens firm.

Well, we will see!

Jul 08 10:08 AM

[John Lounsbury:]

jmorace - - -

Actually, there was a recent much balley-hooed classical head and shoulders pattern completed in early January, 2008. I remember this because I wrote about it to my clients on Jan. 6, 2008. Not all head and shoulder patterns are prescient, but that one certainly was. As you have said, we have to wait and see on this one. Personally, I am net short by a small margin.

Jul 08 12:11 PM