S&P500: Head and Shoulders pattern not confirmed; what next?

The Flatbook readers: We are back with avengence! Our anticipated close below the neckline of the head and shoulders pattern on the S&P500 daily chart failed to materialize and so we did what objective, rational traders do when sufficient opportunity does not present itself - we stayed on the sidelines. That our 200-Day MA has acted as reliable and enduring support from 1st June onwards is worthy of note but more importantly, we will effect a sizeable short once again on touching the descending resistance that yielded our 931 / 954.4 short opportunities - our entry will be 915.8 (ish) should this transpire today -Tues 14th July (see charts below). Until then, we won't move.

The rationale for this trade is once again the extent to which the SPX has remained faithful to this descending resistance and that it has done so since mid May 2008. This may prove to be another very profitable position, as the path to 915.8 might well be followed by substantial market retrenchment. As per our ethos here at the flatbook however, we will trade what we see on the charts rather than engage in conjecture and guestimations as to where we see the market in 6-12 months time.





Let's be mindful this week of the start of earnings season with the standout pending release:

Tuesday - Goldman, Intel Q2 (earnings)
Wednesday - Rio Tinto, LSE (Sales and Trading Update)
Thursday - IBM, JP Morgan Chase, Nokia Q2 (earnings)
Friday - Bank of America, Citigroup, General Electric Q2 (earnings)

Not to state the obvious, but we will keep our eyes on actual results vs forecasted results, so as to be prepared for any potential surpirses.

Wishing you all a profitable trading day!