On the 5 minute chart above The close was similar to yesterday, we raced up to the 1098 area and tried to break through the physiological level of 1100 (white horizontal line) but failed and moved down at the end of the day with people not willing to hold over night. Remember options expiration so volatility could play a big roll by Friday.
One of the key levels I was watching today was that top purple line, which is my attempt at using the andrew's pitch fork. This line indicates that we are still below the upper trading range and if this continues to hold it could signal we are heading down. So the close did seem pretty bearish, with today and yesterday's attempt to break that 1100, there will be some bulls that are not willing to attempt tomorrow. So it will be interesting to see.
The daily chart of about 2 months, shows some interesting facts. There is a triangle ending, the S&P is close to the upper part of this range and by 25-26th this triangle will either result in a break up or down. What is acting as support / resistance. Well now the 50 day MA is holding up the markets if this break down all MA will be above it. Right now the 20 / 200 and the triangle trend line is holding it down along with the purple andrews pitchfork. In addition to this, the 1100 barrier looks very strong. The Slow Stoch is now not over sold, the MACD is showing a momentum shift to the upside (however still negative) and volume was slightly less than yesterday. The line to watch is the light purple line drawn in. A break of this neck tie on a mini head and shoulders could bring us closer to the yellow line which can be seen on the next chart. The the completion of the right shoulder will happen if either today or tomorrow more down side is recorded, then any break of that neckline should take the S&P to just above the 1000 mark again a very strong psychological barrier
So where would this break of the mini Head and Shoulders take us?
Well it could take us below the yellow line which is the original large head and shoulders pattern that developed and broke past couple months. Why did this break down not materialize? Well from some research and deduction the first reason was the media really jumped on this head and shoulders so so many people were aware of it that it could have caused a disruption to a normal break down. Secondly and more importantly the media / government pumped up Q2 earning which helped the rally move up. Well guess what Q2 earnings are almost over and we maybe entering another down leg, what will save us this time? In my mind there is some debate over what should be considered the Larger term Head and Shoulders pattern, either the yellow one from the previous version or the more recent white neck line from the original H&S break down. That would be more logical as it is the most recent / relevant since if the market breaks down there, there is no doubt the recovery has failed.
Anyways this is my thoughts on possibly where the S&P is heading, I could be 100% wrong but I do know this, Options expiration has come at a critical time where a big decision has to be made over the next 2 days UP or DOWN. The next 2 weeks of market action could be very telling.
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