Technical Analysis: Head And Shoulders Tops In Progress?
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The Dow (first chart below) and S&P 500 (second chart) remain in danger of forming head and shoulders tops here. A break of 8200 or 8550 on the Dow and 865 or 900 on the S&P could dictate intermediate term direction, although 8000-8100 on the Dow and 855 on the S&P could provide support. Head and shoulders tops stopped rallies in May 2001, January 2002 and August 2002, so the pattern, if it continues to form, should be heeded. However, the October low was the first technically sound one we've seen in this bear market, so we lean against new lows coming this soon, but a deep pullback is not out of the question, and likely if the patterns complete. A few more days within the current range and then a breakdown would cement a top. The Nasdaq (third chart) has shown nice resilience the last two days. A break below 1340 could renew the downtrend, and 1380-1400 is likely to be tough resistance.
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