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I've pretty much given up hope on the head and shoulders pattern. As I'm typing this, it is being threatened to within an inch of its life, and in my experience, when things are this close to getting violated, it's pretty much a lost cause. Charts don't typically creep up to a hundredth-point of their "violation point" and then suddenly give up the ghost.
I only entered my precious metals trades (GDX, GLD, SLV) and commodity trade (DBC) on Wednesday, but I am taking profits on these. The gains have been very good, but I'm a little uncomfortable at these levels holding on, given the substantial amount of overhead resistance.
We all get so caught up in the tick-by-tick of the markets that it's easy to lose sight of the bigger picture. Here is a very simple chart:
It is, as you've guessed, a weekly chart of the S&P 500. And what does it tell us? To me, in indicates a couple of things. First, it tells me that, for the first time in nearly two months, the bulls are starting to lose their grip on this countertrend rally; and second, it tells me that unless we have a very big reversal today, this will be the first week since early March that there's been a weekly loss.
It's no accident that I'm in a lot of cash right now, because I am somewhat cautious. The large head and shoulders pattern – which is our collective best hope for a meaningful tumble to 780 – is still in place, atlhough each little push higher makes it a bit more rough and jagged. But as long as we stay beneath 860, I think we remain in good shape.
