Sunday, May 15, 2016

Beware Of The Obvious

There is an obvious price pattern on the price chart for the SPY and the emini SP500 futures. That obvious price pattern is the head & shoulder. Not saying all head & shoulder patterns will fail, but if one put the price pattern within the context of the market breadth indicators, one needs to beware of the obvious! Although there has been a recent minor pullback, but the market indicators on my watch list have not turned negative. If this H&S pattern breaks along with deteriorating market breadth, then the prudent thing to do is to wait for a potential retest of the neckline before considering a move toward the downside. In the meantime, be defensive and be cautious as the market attempts to re-establish a near term direction.


(click on the chart to enlarge)


Whenever there are many eyes watching an obvious pattern with anxious negative sentiment, do not be surprised to see a head fake to trap some of the shorts. The market will fool most of the people most of the time. Beware of the obvious and expect the unexpected!

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