S&P 500 - update

Last week [click here] I wrote about the H&S pattern on the S&P 500 chart, that we are back on the neckline, and if we don't see a bounce soon, things could get ugly quickly.  Well Friday did turn out to be a green day on the charts, after bouncing in the early morning right at the neckline again....see below

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So why was I looking for a bounce?  Well because the H&S shown above isn't the only pattern we can highlight on this chart.  We also have a horizontal consolidation pattern, where we can see that the S&P has essentially been range bound between 1040 and 1130, and price typically bounces off the top or bottom of a range at least once before coming back and breaking through, or price will hit the top/bottom of the range and simply reverse, headed back up/down to retest the other end of the range.  I discussed the implications of a consolidation pattern [here] last week, in relationship to Amazon.  The implication is the same...a bigger move is imminent.

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Finally, we have a symmetrical triangle pattern, which is also a type of consolidation pattern.  Unlike a horizontal range pattern, that can churn back and forth for great lengths of time, the symmetrical triangle has a definite end point (the apex of the triangle), assuming the pattern remains valid.

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So the question is, what happens next?  Short term, I'm not quite sure.  We'll need to see how things play out next week.  Longer term, I still think the direction of the market will be down, as the Bulls have not been able to break the June high at 1131.   For next week, I'll be watching the gap fill at 1067, and the 50% fib retracement level at 1084 as initial resistance for any moves the Bulls make.  I've blown the picture up a bit to illustrate these levels below.

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So that's it for my thoughts on the big picture.  Ultimately lower, but short term, we're in wait and see mode to see if the Bulls can get any momentum in this bounce.

Good luck trading.