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S&P 500: Standing Head-and-Shoulders Above the Rest?

S&P 500: Standing Head-and-Shoulders Above the Rest?

What’s inside:

  • The S&P 500 puts a potential lower high scenario and…
  • A possible right shoulder to an H&S formation
  • Need confirmation before turning outright bearish, market still tilted slightly higher

In yesterday’s commentary, it was noted that a cautiously bullish stance appears to still be warranted, however, a bearish alternative was also explained should the S&P 500 make a lower high. A ‘head-and-shoulders’ top is in the works, with Thursday’s price action acting as a potential right shoulder to the pattern.

The timing of the formation lines up with other market forces. September is the worst performing month of the year for stocks, and as such anything which corroborates this seasonal bias is something worth sitting up and paying attention to.

But to reiterate from yesterday, a break of the neckline and a lower low below 2156 is needed to confirm the pattern; so we aren’t there yet. An upward channel since the mid-July chop-fest began continues to keep the market pointed higher, for now.

The clock is ticking. If the market is to roll over, we should see a confirmation break in the next week or so. If support holds, then so does any bearish bias.

One other note worth mentioning, since it’s been awhile since discussing, is that in recent years when the market made a new record high it had a propensity to punish those who bought the breakout within days to a couple of months later.

You should always be looking for ways to improve your trading; check out one of our several free trading guides designed to help do just that.

---Written by Paul Robinson, Market Analyst

You can follow Paul on Twitter at @PaulRobinsonFX.

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.