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HnS vs. InvHnS Battlemania

Let's see.

The Head and Shoulders Part III for the SnP500 is approaching the compromised target of 1111 to 1113.


However, there is also an Inverted Head and Shoulders forming on the daily.  It is not so apparent with the Spx but much more so with the XLF, which is a major component of the SnP500:


XLF has a potential Complex Head and Shoulders on the weekly chart:


The battle of the HnS and InvHnS is starting to brew in this most undesirable place on the weekly and monthly charts where they usually do not belong.

I am having an impulsive desire not to trade or even look at this Grinder area.

The outcome is not going to be good for most traders.

The best thing investors can do is sit at the fence and see how the bull- and bear- traders fight each other out into this modern-day Roman Colosseum.


2:34 pm: 

Not a good day for short-sellers.  Spx tapes are still bullish. 

But, the VIX was able to hit a minor double bottom on the 120min chart at 23.11 and is starting to react to that support.  The stronger double bottom support is at 22.87 level.

For the Spx, the intraday wavecount is highly unpredictable as to it's final outcome:


I bought some SDS at $31.95 at noontime to hedge my SSO longs (bought at the early July lows) in this highly unpredictable mid-term level. 

Will add more SDS buys and/or short the ES/YM/SPY when things get a little clearer along the way.

EOD Update:

Bears got clobbered today and a follow-thru rally is expected tomorrow for a run toward the 1120 nominal v-th target for the Spx on intraday chart.

One factor I forgot to look at is the VXX which has already broken down a few days ago:


Finding high probability targets is a lot harder to do with VIX and VXX since their price values are not flexible enought for EW run rate targeting system.  I usually use eye-ball approximation of when and where they would end the run;  or use candlebars for topping or bottoming patterns; or use fibo-extension method in some cases that proved very accurate in the past. 

VIX and VXX price actions are now starting to become harder to predict, however.  So, I will be less reliant on them as an aid for precision trade entries.

Also C or Citigroup has a high correlative price runs for a complex flat pattern on the daily and more likely will prove a high probability wavecount for the bears once the Treasury got desperate to sell their remaining shares.


I bought some C shares at or near the 3.55 bottom and had been dispensing them on their run ups.  It had been a trap most of the time for a lot of traders due to the complexity of the runs and the extending potential bear flag.  

This is still a work in progress so the bear flag may become a bear trap later on or the c1-wave might truncate at the $4.20 area then go vertical down.  But unlike most penny stocks with highly unpredictable price runs; C is a high volume stock and thus a lot easier to trade.

-    SnP500 has a fibo confluence level at 1115.35-1115.72 range on the daily.  After that, then the June's high of 1131.22 is the next priceline resistance.   Another fibo confluence level is at the 1140-1142 range.  And a major moving averages confluence at 1154 on the monthly chart.

-    The downtrendline support for VIX on the weekly chart is at 21.50 area.

-    DAX should be hitting the 6248 double top tomorrow on the 240min chart and the 30min chart is a 1-2-3-4 rally from the last low of 5906.   The 5th run is presumed to be in progress before closing time.  Major resistance on the daily chart is at the 6325 downtrendline or the 52-week high of 6342 if 6248 minor resistance does not work - since the 5th for DAX 30min is capable of becoming the extended wave.

-    Against all those bearish backdrops is the potential failure of the Head and  Shoulders Part III for the bears once Spx breaks hard above 1117  Right Shoulder measured target (resistance).   This will give the bulls a theoretical target of 1223 (1223 is the RS 2x measured target but I find this method not very reliable - it undershoots or overshoots by a wide margin most of the time).

-    DAX weekly chart uptrendline resistance is at the 6580 area, which is basically the major target (see previous Instablog DAX weekly chart).

And then there is the Grinder Scenario for the SnP500 weekly chart which is basically the b-wave up with an ideal time range of 14 to 16 weeks duration (see previous Instablogs and commentaries for SnP500 weekly chart a-b-c scenario) measured from the July 1, 2010 low of 1,011 for the Spx.

This is becoming a lot more interesting for the bulls and bears. 

And a lot harder to trade.