A Different Look at the S&P

The US dollar continues to get squeezed in the pennant/symmetrical triangle (it's really been long enough to be a symmetrical triangle, but the effect is the same). We're likely to see a continuation of the down trend.


Meanwhile, the S&P has taken a decided run to the upside. We looked at the head and shoulders developing before very early on and may have jumped the gun on the downside call. If you look at the head and shoulders as a complex head and shoulders pattern, There are two possible necklines, as seen on the chart below.


We took the uppermost one as the neckline, which was most visible a week or two back. However, if you take the lower one--the one that is most horizontal, you can see that the S&P bounced hard off of that 878 level and has gone straight up ever since. Thus, one could argue tha the head and shoulders pattern was never active to begin with...

Note the MACD is making a bullish crossover and the RSI is above 50 for the first time in a while. The S&P will probably challenge the right shoulder range of 930-ish soon. A failure there would be considered quite bad. Success there would likely allow a challenge of the 950 level--which has been strong resistance. Failure is likely there as well. However, if it breaks it to the upside and moves above the 50 week moving average of 936.92, then we could possibly set up a Dow Theory bull market signal. That would change everything--for a while. The long term chart is moderately bullish with positive RSI, MACD and Williams %R.



Truth be known, we're in a long term bear market (as we'll prove in our "Where?" series) that is generational in nature. If there's a bit of recovery, it will be short lived (maybe a year or so at most) without a growing jobs base.

The US must move back to making things that the rest of the world wants to buy in order to fully recover. The paper shuffling financial system must be checked and the dollar must stop being trashed or the middle class will evaporate within a decade.