S&P Key Pivotal area.

Some of my recent postings have warned of downside on the S+P500 and risky assets, and I have played the market from the short side over the past couple of weeks. However, despite a move to lower levels, this generally has the feel of treading water a little whilst it still makes up its mind.

The chart below is more of an observation, rather than a clear pointer to direction at this stage.

It shows Daily S+P500: The pattern formed over the period through Feb-Apr was an continuation Head +Shoulders pattern. These can be very dynamic patterns when they break-out ( I have included a couple of examples below of this from Weekly Gold and Weekly T-note futures). The S+P breakout however has stalled and has been on an extended re-test of the breakout. In the past few days this has made a minor push below the neckline, a rapid rebound could still save it, however should it continue to sink, then this will be a clear failed pattern, and it is my experience often failed patterns can come back to fully re-test the extreme of the pattern, in this case around 1240/50. - Thus it seems that the next few days may be crucial for the S+P for both the bull and the bear case. - There is one other option, the boring option; whereby it just continues to meander sideways....

Examples of some successful Continuation Head & Shoulder patterns:
1) T- Note Future 2009/2010

2) Gold 2008/2010