Head & Shoulders Fri 7-17-09... It Aint over Till it's Over the Head

SPY Daily

I know, we are all sick of IT!

BUT...

The upward sloping complex Head and Shoulders pattern tag is still in play as well as the MACD divergence. This is a Daily chart of SPY.

I believe the structure begins at the apex of the triangle on the left (the apex is the net retracement of a triangle pattern). Typical support is at the bottom of the first shoulder but this has not been a typical market.
Almost every pattern has been driven to extremes or doesn't follow through at all.

The robust nature of this last rally is no exception.

One would think if this is a failure of the pattern the volume would be through the roof! But this week volume was very low.

I think this was a brute force push by the big trading houses.

There have even been reports of short position blocking, tape manipulation, and forced short ticket cancellations from the guys at Zero Hedge.............

And the earnings reports continue to try and convince everyone that things are getting better! Well you can't grow an economy on IBM government contracts , Obama jobs, Apple iPhones and apps made in Asia, declining top line company revenues , depleting inventories, cutting jobs, raising taxes, printing currency to buy down debt or mandating everyone have health care.........OH ya ....Did anyone notice that the USA was the largest consumer of China's products? So how is China going to save our economy? Well that's my long term view and really doesn't effect my day to day take on the market. Only the tape can guide us there...........Enuf Ranting.

The pattern is now at the top of the 2nd right shoulder and the trade count is 25 days peak to peak from the head to the right and left side.

The valley count is 31 trade days from the apex to the center line of the head.
As you can see there is time left, 5 trading days to move back to the lower neck line.....

The candle pattern at the top of the right shoulder is two opposing dragonfly doji's which indicates an indecision in the market.

Based on this analysis I am more comfortable short , with a stop above the high of the head, than long. Next week the market could go to 1000 as easy as 800 so stay on your toes and keep your dukes up!

For more on head and shoulders , John Lansing has a great analysis as well as John Murphy

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