Is There a Head and Shoulders Top in the S&P 500?

At the market close Tuesday I posted a picture of the S&P 500 ETF ($SPY) to twitter and noted I was watching it. It was a very short term chart measuring 15 minute candlesticks over a 4 day period. This got many traders excited. That is because it showed the possibility of a Head and Shoulders Top in the ETF. I have updated the chart for the pre-market price action below.

A Head and Shoulders Top would give the bears, fear mongerers and chronic short sellers a raison d’être. No wonder they are all excited. but lets not get ahead of ourselves. First, a Head and Shoulders Top does not trigger until the price moves below the neckline. This is not a given. In fact trading against it early is a recipe for getting your head cut off.

Second, the price objective if it were to trigger is a move all the way down to 241.95. That is just 70 basis points below where it is trading as I write. Hardly a major move lower to go all in on. And in fact on longer timeframes the SPY looks to be in a solid uptrend. Trading a small move lower would be akin to a salmon swimming up stream or picking up nickels in front of a steam roller. A victory for short sellers to cheer about but no one will really notice. So if you are among the perma-bearish crowd get prepared. You just might have your day.

If you like what you see above sign up for deeper analysis and trading strategy by using the Get Premium button above. As always you can see details of individual charts and more on my StockTwits page.

The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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