SPX Daily Chart Fibonacci Retracements Head and Shoulders (H&S) Patterns

We discussed the triple top and negative divergence as it formed during October and price has broken down.  The H&S pattern shown by the red bars is currently in play with the head at 1470-ish, neckline at 1430-ish so the target is the 1390's which is key S/R from late July.  The triple top and H&S should be viewed as one in the same for this chart even though the shoulders are at the same relative height as the head.  Price fell thru the neckline at 1430-ish and has not yet back tested this failure so keep this thought in mind moving forward. Also note the intraday high the last two days is 1420-ish so this resistance level is important moving forward.  The neon green lines show a potential larger H&S under development.  The head is 1475-ish, just like the red head and shoulders, but the neck line for the potential H&S is at the 1395-1400 area.  A break of the neck line places the lower target at 1310 in play. Note how the 1310 level is a very attractive horizontal support level as well. A confluence of an H&S downside target and horizontal support sometimes acts as a stronger magnetic force to pull price down. But let's not get ahead of the game too much. Simply keep the neon green H&S in mind moving forward; a right shoulder will obviously be needed and that can be placed when the broad markets receive the obligatory relief bounce at some point in the coming days. The 1420, 1424 and 1430-1435 levels all serve as upside targets for a recovery bounce.

The Fibonacci retracements for the move from the June low to the October high are provided.  Price may retrace down to the 38% Fib at 1395-ish, 50% Fib at 1379-ish and 62% Fib at 1345. The 1394 and 1391 levels are very strong support levels and as mentioned above, the red H&S targets the 1390's and the strong support area and neon green neckline level is at this 1400-ish area.  The 1403 support can be viewed as an extremely important support level. If price falls thru 1403, there is likely extended and substantial trouble ahead for the broad markets.  SPX S/R is 1436.17 (200 EMA on 60-minute chart), 1435, 1434.46 (50-day MA), 1433, 1431, 1429, 1424, 1422, 1419, 1416, 1413, 1409, 1406, 1404, 1403.65 (20-week MA), 1403, 1399, 1397, 1395.81 (100-day MA), 1394, 1391 and 1389. The pink circle shows textbook distribution with the large volume sell days after the lower-volume up days. This is where the large fund houses are distributing shares to Ma and Pa Sucka at the top just before the roll over. Every top needs the bag holder to show up and Joe Sixpack kindly obliges once again. The stochastics helped create the intraday bounce yesterday but the indicators are all showing weak and bleak profiles (red lines all sloping lower) forecasting lower prices ahead.

What does all this mean? The SPX is likely looking for a level to bounce from for a quickie relief rally. This bounce level may be from 1413 (current print), 1409, 1406, 1404, 1403, 1394 or 1391. The bounce should be short-lived, perhaps occurring next week on full moon Monday, or during the expected seasonal bullishness that appears the last couple days of October. The move up may target a back kiss of the red H&S at 1431, 1433 or 1435, and note this neckline back kiss would also fulfill a back test of the 50-day MA.  At that point, price will fell free to start lower again, thru the 1390's, thru the neon green neckline and lower, the 50% Fib serving as the next downside target. The S&P futures are off seven points now, they were off as much as 12 this morning.  It appears a test of the critical 1403 support may occur after the opening bell. This information is for educational and entertainment purposes only.  Do not invest based on anything you read or view here.  Consult your financial advisor before making any investment decision.