SPX 10-Minute Chart Head and Shoulders (H&S) Pattern
The H&S on the 10-minute is an interesting pattern to watch as the day begins. Note how price bounced off the neckline in the final one-half hour of trading yesterday afternoon. So price will tease this neckline this morning and either bounce, or die. The S&P futures have been buoyant all morning so at least initially, bounce appears to be the answer. A failure of the 1691-1692 neckline will target the 1683-1685 landing zone and, lo and behold, this lines up with the prior support from Friday morning. The indicators are a mixed bag. The RSI and money flow never reached oversold territory. Despite the higher futures, the projection is for the neck line to fail and for price to venture towards the mid 1680's. Perhaps another right shoulder will form in the mid 1690's after the bell and maybe the 10 AM pivot on New Home Sales data will create the neck line failure. The bulls remain in control of the markets and are using lower volatility and higher copper as the two main fuel sources the last few days. 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.
Note Added 4:01 PM: The H&S plays out in textbook fashion today. Price fails the neckline at 1690-1691 and dropped to 1688 after the opening bell. A bounce occurs ffrom 1688 back up for a back kiss of the neckline, which was successful, resulting in collapse. Price fell to a LOD at 1682.57 satisfying the H&S target to complete the pattern.
Thanks for the charts this morning, KS. Fairly significant move by the 5- and 10-year treasuries (nearly 8 cents for the 10-year).
ReplyDeleteYep, the rising yields should place pressure on utilities. Bulls need UTIL 423 for more fuel, bears need 481. UTIL begins at 507.
DeleteTypo, should be 523 not 423.
DeleteKS. How does bonds affect equities? bonds down yields up equities down?
DeleteNope, bond and note prices down is yields up is equities up. The Fed has all asset relationships messed up these days. Price discovery is lost due to all the money printing so no one really knows what anything is truly worth anymore and many asset relationships are not in sync. Typically money flows from stocks to bonds and bonds to stocks depending on risk-off or risk-on, respectively. Remember that when bond and note prices move down (less demand) the yields move up. Note prices move up with higher demand for the Treasury safe haven when trouble appears. The higher note and bond prices send yields lower. So if traders are worried, they will typically pull money from stocks by selling stocks and send the money into Treasuries. As lots of folks do this the note price rises on higher demand and yields fall, a deflationary and disinflationary risk-off vibe. So yields typically move up with stock prices moving up and yields typically move down with stock prices down.
DeleteDown the road, this may disconnect as the 10-year yield moves above 3 or 4%. Also, recently as money flowed out of Treasuries, much of this money did not venture into stocks, only a small amount, much of the money was placed into cash. This would either be due to folks not trusting the stock market right now thinking it is at a top, or simply that folks are having trouble getting by month after month and may prefer the money to simply sit and be used for expenses and also folks will at least know they will not lose any of it.