S&P500 Inverse Head & Shoulders: Target 1430

That's a pretty neat-looking Inverse Head & Shoulders (IHS) Pattern on the hourly! Although a IHS pattern is seen more often at bottoms of downtrends, they do occasionally turn up uninvited. A target of 1430 can be calculated based on the chart. Severly overbought on short-term charts, there is a danger of a pull-back, and hence chasing price here would be unwise!

Itching to get LONG?

If you are not long already, wait for a successful back-test of the neck-line, or at least a pull back to wind down the RSIs. That will enable employment of appropriate stop-loss points in the event of a failure.

Significant TOP around 1430

Last update, we talked about dangerous levels of BULLISH sentiment, as a contrarian indicator. Take a look at the weekly chart above. I believe we are approaching a significant top around 1430. There are three reasons to support this proposition:

1. Inverse Head & Shoulders Target level as shown above
2. Serious congestion zone from 2007-2008, just before the wave 3.
3. A Fibonacci 1.38 extention level is reached at this level

All the best!

Shanghai Composite: Retreating towards 2850

Shanghai Composite hit the upper trendline of a broad triangle pattern (refer to previous post), and promptly turned down. Selling has picked up pace somewhat,but has support around 2850 - a level also supported by the rising trendline, as shown on chart. In the event of a bounce, resistance lies around 2950. We will review this picture in case of a break towards 2650.

S&P500: Sentiment fires a WARNING shot!

As the S&P500 wavers at rally highs, bullish sentiment is reaching dangerous levels. Even if not an immediate sell signal, further price rises will be hard to come by until the bullish sentiment subsides substantially. Here's the SPX500 trendline watch, as well as the sentiment chart.

Shanghai Composite: A BIG Triangle = A BIG Move ?

Since its dramatic recovery in Wave A, the Shanghai Composite has been stuck in sideways action for almost 2 years in B-wave action, providing good short-term trading opportunities. We've talked about a possible truncated Wave C in previous posts. Meanwhile though, a BIG fat triangle has set up, and price is currently approaching the very important top line. A break above will have immediate resistance around 3180, but in the longer run could lead to much higher prices in an overdue Wave C. In case of a turn-down, support is at 2650, followed by bottom line. Eitherway, we may be looking at a BIG move, and hence patience is a virtue!

Hang Seng Index: Consolidation before a Breakout?

Since my last post Hang Seng Index: Break Down!, HSI has successfully held support around 22400. Looking at the weekly chart, the index has seen sideways action for the past 5 months, and is reaching the upper trendline resistance yet again, around 24000. We may see some consolidation here. However, the volume patterns suggest that a breakout above is possible in the short-medium term. Intial target will be 25000, followed by the significant pivot of 26300.