Looking at the US S&P500 today before the open the technical analyst will notice a number of things.

1. Last week was a good week for the Markets showing a solid rebound.
2. We are at an important juncture.  Can we break 1076 on the S&P500.
3. A head and shoulders top may be forming.

The head and shoulders top is one of the most reliable price patterns in technical analysis.  It simply depicts a change in trend.  If the final shoulder forms this shows that the current uptrend has stalled as it cannot surpass the prvious peak.  We have a situation here where the market participants will decide if the head and shoulder will complete or not.  They will show this with either strong buying through the 1076 level, then through the 1101 level.  The 1101 level is the safer buying point.  However if the short term rally stalls before breaking 1101 on decreasing volume this will be a strong sign that all is not well.

You may be interested to work out why.  Is it the unemployment rate, or other economic factors.  But sometimes the cause is not nearly as important as the effect.  using Technical Analysis we are looking strictly at the effect.  The market participants will let us know if they are bullish by the market moving up.  If (as I suspect) the market participants are nervous of rising prices, then this rally will head downwards.

We are in a typically good time of the year in terms of market cycles, the pre christmas period typically shows superior gains.  But that is only probability.  I am waiting on the sidelines with my cash in my pocket waiting for the market to tell me what to do.

Name: Barry D. Moore

Bio: Certified Technical Analyst (Stock Market Technical Analyst), Full Member of Society of Technical Analysts (STA) Level II CFTe (Certified Financial Technician), independent trader, author, trainer & blogger.