The stock market is now acting 'normal'. So normal I find myself wondering 'what's up?'What's up is people's doubt, fear and anxiety after a historic throttling and 24/7 negative reinforcement compliments of the major media that was more interested in what, I don't know... Britney Spears? Is she still around? What other trash were they obsessing on? I don't know. I do know they were scaring the bejeezus out of peak oil-o-phobes just last summer. Anyway, the point is they slept through the economic Armageddon story until it was time for maximum sensationalization and until it was too late for viewers, readers and listeners to effectively prepare, other than to buy t-bills down to 0% in a knee jerk.
But, as often is the case when I am just trying to show an interesting chart, I digress. SPX sports an actualized mini inverted Head & Shoulders bottom pattern within a larger potential H&S. You see the targets. The little feller has broken the downtrend line and made its first attempt at the SMA 50 as was speculated would happen in this week's NFTRH. It would be totally normal - and healthy - for the index to drop back and fill the gap there but that is not necessary because until any rally proves itself as more than a bear market variety, I expect lower prices to come later in 2009 and the gap could be filled months from now. Right now the SPX is trying to find support at the broken neck line. The optimum play would be a gap fill and immediate reversal because the longer the index stays below a neck line, the more negative voodoo would be cast upon its bullish prospects.
The near term target off of this little H&S is 1080. That is locked and loaded until our parameters are negated. It would be nice to make a high at the projected neck line of the bigger guy (blue dotted line) and decline, giving traders another scare before the real rally that ultimately takes SPX potentially to the 1200's in Q1 2009. Indicators all look solid as well and we await confirmed trend change by AROON, which still shows daily down.
Regardless of whether or not the above scenario plays out, it is good to be able to use technical analysis again on normal looking markets, and many of them are making sense right now.
