Calling Hawaii 5-0 to Rescue the S&P 500

• Posted by Greg Harmon
• on October 21st, 2014

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The S&P 500 has had a really hard October, falling through the 200 day SMA for the first time in nearly 2 years. With the bounce that started last week many traders are thinking it is time for a vacation to get their heads clear again. For those on the west coast that might mean a quick trip to Hawaii. Land of paradise. Well that is how it is perceived at least. But it is not always so peaceful. Hawaii 5-0, the television program remake of the drama from the 1970’s shows that there can be trouble in paradise. And traders escaping to Hawaii may run into that same Hawaii 5-0 trouble in the S&P 500 very soon.

The chart above shows an active 5-0 harmonic pattern in the S&P 500. The pattern is distinguished by the move higher into X with a pull back to A. This is followed by a retracement of between 113% and 161.8% of that pull back from X to A, in this case 132%. Next a retracement of the AB leg by at least 161.8% and not more than 224%. It was 173% in the current pattern. The key now is that when price retraces 50% of the BC leg it can be shorted. This level is 1920. That is less than 14 points away. Will the 5-0 harmonic take control and move the S&P 500 lower? Or will the force of evil be removed as we hear those magic words for profits to the upside. Book’em Danno.

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