SPX S&P 500 Daily Chart; H&S (Head and Shoulders) Stock Chart Pattern

The US stock market that is the S&P 500, SPX, displays an ominous H&S (head and shoulders) chart pattern. A previous post highlighted a similar set-up with the SOX (chips). It is textbook so far.

The left and right shoulders have nice touches at the 4340 neckline creating a clean pattern. With the head at 46 hundo and the neck at 4340, the difference is 260 points. Thus, taking 260 away from 4340 sets a downside target at 4080 if the 4340 neckline fails.

That downside target at 4080 would get attention especially when Wall Street is singing in unison that the year will end with the SPX in the 4600 to 5000 range or higher. If the H&S plays out, the analysts will only be off by a thousand points.

When the neckline fails, a back kiss is expected since it is such an important line in the sand. Price comes up yesterday for the back test sitting at the neckline at 4337-4340. The SPX must make a bounce or die decision now either shunning the H&S and instead bouncing and beginning a big rally higher again, or, dying from here and collapsing placing the low 4080 target firmly on the table. Interestingly, S&P futures are deteriorating overnight now down about -25 points about 5 hours before the opening bell in the United States for the regular session (potentially dying).

The thin purple lines show important price support levels on the way down. That orange circle is a big gap that will need filled at some point forward and of course when you mention gaps you must say that it is big enough to drive a truck through it.

The 4050-4170 congestion range from April and May serves as a big landing area if the H&S failure starts kicking the collapse in price into high gear. There is lots of fun ahead. The SPX weekly chart indicators are weak and bleak wanting lower lows in price going forward on the weekly basis so this metric says there is a high likelihood that the H&S will play out.

If price bounces, watch the gap above (orange circle), that is big enough to drive a truck through, because a brief 'bounce' rally may occur from the neckline and fill that gap, up to 4400, only then to roll over, fall through the neckline again and die going forward. You simply have to watch how the charts develop and they will provide the answer ahead of time.

The ole Wall Street adage, "Sell Rosh Hashanah and Buy Yom Kippur," was right on target this year. If you sold on 9/15/23 and covered yesterday during the rally, you are a happy camper. It is likely only coincidence that it worked out successfully. The saying, if memory serves, came from the many Jewish traders that would step away from the stock market during this important religious period, and then return on Yom Kippur with cash in their pockets ready to buy stocks. Nowadays, kids are trading stocks in their underwear in Mom's basement so Jewish traders taking a few days off does not have the same impact now.

Watch for the bounce or die decision today from the 4340 neckline. A bounce would hint that the gap above at 4375-4400 may need filled. If price dies from the neckline today, that is an ominous development. The H&S pattern will be flashing red signals and anyone long the market will be clenching their buttocks. Simply watch the charts and they will provide the answers going forward. 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 9/28/23, Thursday Morning, at 4:59 AM EST: SPX is at 4275 and fell to 4238 yesterday.