Saturday, July 14, 2012

Long-Term Head & Shoulders Top in S&P 500

I pulled a maximum chart for the S&P 500, and noticed something peculiar. The index appears to be in the process of forming a long-term head and shoulders top that could bring the index down below March 2009 lows over the next 6-12 months. A head and shoulders top is an extremely bearish chart pattern. It involves an initial upward movement and minor retreat (forming the left shoulder from 2000-2003 with the S&P 500 peaking at 1498), followed by another upswing to new highs (forming the head from 2003-2007 with the S&P 500 peaking at 1526). The right shoulder is then formed by another move up, but not as high as the previous move higher (2009-NOW). If this pattern completes, I expect the S&P 500 to fall to 600 or less before there is a new long-term bull market for stocks. Otherwise, if the S&P 500 closes convincingly above 1526 in the coming months then the markets will be off to the races.


  1. I totally agree, we could be in for another depression with all the credit problems arising throughout the world. Everything is interconnected and I hope it doesn't happen, but it's not looking good. That's why we have to act to hedge and prepare just in case.


    1. Right on! It's not about being right or wrong, it's about being protected either way.