Take a look at the 10 year weekly chart of the SPX. Massive head and shoulders penetrated near the 950 area this summer. We plunged from 1150 to about 750 and then had a rally in August to the 950 area. That's approximately a 50% retracement right to the neckline with a subsequent failure. In my opinion this is not a time to be bottom fishing. Pundits screaming "the bottom boss, the bottom" like Tatoo from Fanatsy Island, but in my opinion, we have only just begun. JMHO
Nice observation. Interestingly the monthly chart has come in to play over the last year. While it doesn't effect the daytrade scene, it is still very, very interesting. You might want to read the articles by Thom Callandra at CBSMarketwatch.com that he wrote last week. Specifically the ones with Robert Precter and Martin Weiss. I've been in that camp for 2 years and things don't look good.
as oldtrader has said, how many times have u seen a head and shoulders pattern break down just enough to screw people, then it takes off?!?
I doubt this time my boy. You'll get the sharp fuck you rallies from any level. Didn't we just have one? But this stuff will not turn good good any time soon.
yeah, we've been talking about this pattern since Feb 02... http://www.elitetrader.com/vb/showthread.php?s=&threadid=3902&highlight=chart+challenge and last week when Bill Gross said he was bearish on equities (helps that he's a bond fund manager) his target levels for the S&P were way down by that trend line...650 area I think he said.
That head and shoulders pattern is like a cat with nine lives. The SPX has been ready to fall over the edge at SPX 875 - 885 and yet lately it just seems to climb back to SPX 900 again. I don't know if it will fail but it's hanging on by it's finger nails. If that level breaks, it could be a L-O-N-G way down!!! --- Cuddley
That H & S might be good if confirmed with some volume, momentum to the long side. The trend is your friend. Newton's Law of Physics also applys. But to go on a bottom fishing expedition is dangerous business...
Don't ever get hooked on just one thing. Be ready for anything....if we get some strong up volume on rising days, good-bye to the H & S. Just be prepared for whatever happens and beware of getting hooked on one indicator.
What a lot of balloney about Gross. If you had any idea about bonds and credits in particular (that's corporate bonds for wallies like yourself), you would know that deteriorating credit quality as consequence of of lower cash-flows and earnings, hence lower stock valuations are not in his or his fund's best interest. The guys at PIMCO are very smart and unlike yourself, know their stuff. I had them as clients when I was trading corp. bonds. Brush on your "Market 101"