Some technicians have talked about this recently but not nearly as many I anticipated. the SPX is showing the final phase (right shoulder) of a head and shoulders pattern. Usually when this pattern forms after a strong rally (not many too much stronger than the one we just had) it is an indicator of a topped out market and indicates an upcoming correction.
just an something to keep an eye on.
Forum > Head and Shoulders Pattern Developing On The SPX
Displaying entries 1 - 20 of 28 forum posts in total
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Posted July 02, 2009 (12:02PM)
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Posted July 02, 2009 (02:48PM)
Speaking of Head and Shoulders.. ILMN .just broke support for right shoulder @ 33.70... This info for Shorters mostly... ;) |
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Posted July 03, 2009 (12:57AM)
This is the single best piece of investment info I've seen all week. Thanks, Income Trader!!!
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Posted July 03, 2009 (01:22AM)
I was on a conference call where a few technicians discussed this. They admitted that there is something like Head and Shoulders on the daily charts. It is not visible on the weekly charts and the longer term charts take precedence
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Posted July 03, 2009 (10:03AM)
Old Fart, |
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Posted July 03, 2009 (03:08PM)
Maybe it is just me, I just do not see it. I think the chart shows resistance around 950 and 880 support. If the 880 is breached, selling would be ferocious. Just my personal opinion
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Posted July 03, 2009 (09:00PM)
880 completes the pattern (necktie) and I agree selling most likely would be ferocious if we breach.
Take a look at the daily (close values) on the SPY. That is a pretty classic bearish head and shoulder especially when you consider the decreasing volume. We may have some sideways action for a few sessions but this pattern merits some concern to those that are all in bullish.  Here is the weekly chart.  |
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Posted July 04, 2009 (07:34AM)
Are there charting programs that draw during Pre-Market and Post-Market?
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Posted July 06, 2009 (04:25PM)
Here's my concern with using standardized chart patterns and indicators for betting on market direction.
The TD Ameritrade commercial...that one where they promote their in depth chart features with actors role playing as home traders, saying things like "Ooh...look, there's a head and shoulders pattern, this is what I want!!" or "I use the stochastics 20/80 split for my trades...hey, there's the signal right there!!". These commercials are done by marketing/advertizing companies, these companies, for those with any marketing courses in their background, know a frightfully large amouint of information about their target audience...most can actually tell you what you keep in your fridge and cupboards just by learning a few seemingly unrelated & random facts about you....like magazine subscriptions or cable station preferences. Given that marketing companies are this attuned to the habits and lifestyles of their target demograph, one might start to wonder whether large institutions don't also employ strategies designed to capitalize on habits and probable emotional responses of their "target demograph". |
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Posted July 06, 2009 (05:10PM)
Incubus I agree that some standardized charting patterns are useless these days. Although I think a pattern like the head and shoulders especially on a broad based index is important to watch. The head and shoulder pattern combined with decreasing volume is an indication of market "mood" more than anything else. Institutions drive volume and when the market is rising on continuosly decreasing volume it is an indication that retail traders, not institutions, are driving market action. That has been the case for several weeks now. Because retail traders in general are skittish, institutions are afraid to jump in until the markets let off some steam. Eventually retail traders run out of patience (and money) with the sideways markets and begin selling their long positions. When that happens short action goes up markedly. (happening at the moment) As usual retail traders form the "head" of the pattern (on amazingly low volume) and those same retail traders eventually are the ones left holding the bag on the downside.... I have seen this pattern not come to frution before many times. It is possible that we can get much better than expected earnings and a string of much better than expected economics figures....I am not betting on it, but is is possible because expectations are so low. In that case, the stronger fundamental arguement outweighs the technicals and institutions begin to jump in long with both feet... I agree with the marketing...The truth is that most won't do enough homework to understand technical analysis well enough to be able to use it successfully on a consistent basis. . |
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Posted July 06, 2009 (05:43PM)
income, sorry I will have to disagree. Maybe I can use some charting education (always a good idea) but can you point me to some study that examines the head and shoulder pattern, espesially on indexes and when it has been successful and some stats
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Posted July 06, 2009 (05:53PM)
Old Fart, |
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Posted July 06, 2009 (06:06PM)
Always from an Otter.... Selsium Blue works just as good as Head and Shoulders.... And I'll be betting over the next few days that there are no flakes out there....
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Posted July 06, 2009 (06:22PM)
Charts, patterns and indicators as well as volume are nothing more the graphical representations of the mathmatics behind a stock or index. Income points out a common pattern of reducing volume combined with the head and shoulders pattern where the market has topped and come back down and then started back to the level it was at on the high prior to the top., which often is a symptom of buyer exhaustion, a hesitation for buyers to continue assuming the market is going up0ward. It means the market is sitting on a see-saw of sorts, waiting for the other side of the see-saw to either get lighter or heavier by even a slight amount to trigger the overall concensus on whether we go up or down from here. Ask me just six months ago, and I'd have said it was voo-doo, but in the end math doesn't lie....these "tea leaves" aren't just pretty colors and fancy patterns, they actuallt represent something, but nothing to bet the farm on alone. My point to income is that the market is constituted of two major parties..."us" and "them", individual traders/investors and institutional traders/investors like hedge funds and mutual funds. I have a jaded view of the big guys, this past fall I was ripped to shreds by head fake after head fake on fantastic stocks that would report excellent earnings and then get plundered worse than the market around them. To me, this meant they''d been intentionally targetted by hedge funds to make the most bang for their buck as they liquidated and deleveraged, which is why I made the point to Income I made above. In knowing that a massive institution like GS has computer prgrams that actively trade and billions of dollars in resources at their avail, I'm just careful when placing bets that I suspect the average "home gamer" might be placing. I am not disagreeing with Income, he's been at this most of his adult life, I'm only tossing a contrarian suspicion into the mix to see his thoughts. |
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Posted July 06, 2009 (06:51PM)
Inc,
There are hundreds of technical "mumble jumble" indicators out there. Quite frankly most of them are alot of hogwash. There are some patterns, formations and indicators that when used properly and in conjunction with other basic stats, can help in formulating an opinion regarding market direction. Again, as you know, that is only one piece of the puzzle and there are many other variables that can affect market direction. I certainly don't pretend to believe that a chart pattern hold the absolute, 100% infalible indication of market direction. It just doesn't work that way. (As I am sure you know!) But if the trader is aware of the implications of different patterns and understands why such patterns develop or better said what is behind these patterns, then has one more piece of information to aid in decision making. For example, (as I listen to Kramer spew his nonsense) if someone is unaware of the H & S pattern and that same someone is in the position to make a trade based on the recommendation of the likes of a Cramer, that trader can maybe put off the trade decision until this pattern is actually confirmed or not. In other words, it is one more more piece of information that one can use to make decisions. |
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Posted July 06, 2009 (10:29PM)
income, I apologize. As you mentioned a lot of chart patterns are hogwash and in my mind this includes head and shoulder. The Internet thinks that head and shoulders is one of the most reliable ones, one blogger even mentioned 7 out of 10 success rate. I still have my doubts with complex patterns but again, it is just me. We are watching the same number on the downside - 880 and hopefully it would not take long for Mr. Market to make its mind up or down |
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Posted September 09, 2009 (06:43PM)
Ok folks, here we go again...is it "sell in September and go away"?
Or, do we have the legitimate formation of a real head and shoulders? We're coming up on the anniversary of one of the most infamous head and shoulders in history. |
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Posted September 10, 2009 (01:22AM)
A few days ago, Cramer was saying that there was a reverse (upside down) head and shoulders pattern, and he thought it was a bullish sign.
I didn't really know what he was talking about. Anyone here know what he was talking about, and whether he was right? |
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Posted September 10, 2009 (02:26AM)
I was more being silly bringing this thread back up after the fact of what happened on the last head and shoulders, but then again, ya never know.
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Posted September 10, 2009 (08:25AM)
IT’s charts were posted on 7/3, since that date I am
up more than 15%. Contrary to
popular opinion, I ain’t no freeking genius. So, I think that unless you are committed to doing foolish
things and sticking with them, you should have good numbers since then as
well. My conclusion is that if the
first chart actually shows a head and shoulders, it shows the poverty of using
that formation for making investment decisions.
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