S&P Market Daily Overview With Volatility (17-Jul-2009)

I don't have a feature on my trading platform that allows me to draw free handed, otherwise, I could make this look a bit different.

So, if you can imagine instead of the "W"'s and see each "W" more as one hump. The rectangle would be the bigger hump. This would be a Head and Shoulders pattern.

Volatility remains low, in fact a little lower than where it has been, but not hugely, as we see a hammer pattern, so are we at support for volatility?

The major pivot is 932-933 on the S&P. This will be slightly different for the ES, but close. As we look at this area, in the rectangle pattern, it was support. For the W's, it's the resistance. This is an important point and I would expect on Monday that we would test this area.

Also, the market does not like GAPS. Every time there is a gap, the market comes back to fill the gap. So, I expect that we will fill the gap in the 900-910 range next week. If we look at the patterns in either direction from April through to present, the S&P typically doesn't like to have more than 3 days in any given direction.

In the last March, early April, it did have 4 days up and mid-May 4 days down. So, we can say generally 3-4 days, then a pause or test, or a strong surge in the opposite direction (I sort of see this as a capitulation move just before).

The weekly chart, which I'm not displaying, really looks like an inverted head & shoulders pattern is forming, where the left shoulder & head are formed, so then we need to form the right shoulder. This could take another 6 weeks. If it breaks the pattern of the Inverted H&S, this is BULLISH. Really, if we break this 950ish area, the next major area up is congestion in the 1010-1046 range. Then up to 1224.

There really is the smaller Inverted H&S and a much larger Inverted H&S that begins 10/2008.

As I further look at May through present, this can also look like a regular H&S pattern where the left shoulder, head, and half the right shoulder is formed. If this is the case, the 876ish area is pivot for this.

Remain neutral in the market. Let it do whatever it wants. My opinion doesn't matter anyway. Just make sure you have your stops in place -- to take profits and to take costs, if your positions should go against you. It's never wise to trade on "HOPE". Hope = Dope.
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