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 (NYSE: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.
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