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Spx Inverted HnS

SnP500 is now able to form a potential Inverted Head and Shoulders:


More than 12.34 days for the right shoulder and probability kept rising this pattern will fail with a potential for the Spx to break below the July low of 1011.

Also, the pattern is a potential Complex Inv-HnS and it occured not at a bottom of a multi-month sell-off;   thus the probability of success of reaching 1250 target is much lower at this stage (A statistical analysis I read of only 20% probability rate of making 100% success rate for this type of Inv-HnS.  My own observations is that this type of pattern that usually occurs at the wrong place is more prone to failure than being successful).

This could be the pre-cursor to the  Grinder Scenario or the b-wave on the weekly chart I posted in July:


The initial requirement of retracing at least 62.8% (1056.11 or lower) of the July to August rally has been satisfied already.  Still unknown is whether price will remain below the August high for several weeks or will it break above 1129.23 to form a much bigger b-wave on the weekly chart that will consume a much longer timeframe to complete.

The b-wave should be an a-b-c FLAT pattern  of lower degree consolidating within a tight trading range (as compared to the April to July range) and it  may take as short as 13 weeks to as long as 36 weeks from the July 1st start date count. 

At current form; it is simply almost impossible to know how it will form (it may actually become an Expanding Flat with price breaking above the April high then later breaking below the July low) and how long will it actually take to complete with very little data available (from July low to Present) to make a high confidence trade - or for taking substantial additional long-term investment positions, for that matter.

It is better not to expect too much from the markets when the probability of the Grinder Scenario occuring is high if not very high. 

Therefore, my expectation is we stay below the August high and above the July low for several weeks more before Spx breaks above 1140 to be followed by another run down that should break below the July low of 1011.

However, for trading purposes;  I will be buying SSO with an objective of selling at least 1/3 positions near the neckline resistance and keeping at least 1/3 -  just in case the inverted HnS do succeeds of reaching 1250 and possibly going for 1277 fibo extension resistance.

Aug 25 EOD Update:

The shorts were able (again) to maximize their profits today almost reaching the maximum target of 1036.20 for the Spx early in the morning with another massive gap down.

Luckily, the bulls were able to close the gap before closing time:


The bulls are still not out of the woods yet.  They will have to rally above 1066 for the SnP500 in order to establish a launching pad flag pole for further upsides.

I completed the other half of my FAS and USO buys today near the open and bought SSO, ES, and YM in a hurry before prices were able to jump up.

All of them have today's low as a stop loss and will start trailing them to protect paper profits as soon as possible.

The better buy method is to let Spx make a 1-2-3-4-5 rally on the 15min chart then buy a reluctant and grindingly slow A-B-C pullback down.

Euro$ is in a flux.  It de-coupled yesterday from ES and YM and it seems currency traders are at a quandary of what to do now.  I set my stop loss to b/e for Euro$ longs just in case they can't find enought reason(s) to support the Euro$.