Originally Posted by r0wr
BayMoWe335 makes some interesting points but most have been addressed. Continuing on with the thread, is there an inverse H&S in the forming? Many say that there is, and on the 60 minute chart, it also sort of looks like a half staff, which leads me to believe that there is more up ahead. Vanity, where is the big drop we're looking for at? Is it still out of the question? Or is a Greece pull out of the Euro nearing?
One of the possible alternatives was a retracement of the entire decline from May 1st before crashing after (just like last year). I weighted this to be the less probable scenario after the large reversal from the Spanish bailout failure.
We have a 0.5 retracement level at 1341 that is within a stones throw right now. In the futures market on Monday we smashed through that on bailout hopes for Spain, reached 1346, then it reversed hard. Perhaps right now the equity markets are back testing this resistance level, and we sell off today and begin selling off next week. Theoretically, we could stop right here at the 0.5 level, since futures markets did that already.
The big drop down to 1265-1215 isn't off the table, that is definitely going to happen (look at the June rally upwards, compared to market internals. They are diverging, and market internals and breadth are deteriorating). What is important now is figuring out whether we top out here at 0.5 retracement (1341) or make a push higher to 0.618 (1358) or even the whole thing (but no new top).
I'm out of my shorts at the moment and just day trading dips here and there. What about your thoughts? As for the inverse H&S, I've also noticed a H&S develop on VIX. Which would favor more upside. But then treasuries are saying this rally is false. Time will tell. Waters are murky.