The head and shoulders pattern that everyone thinks can't happen - it's happening. We closed today well below the much talked about $1,040 level that every technician is eying as the neckline of a broad head and shoulders pattern, considered to be the most reliable reversal pattern in technical analysis. Now that everyone sees it, it shouldn't happen right? Wrong. The S&P has made an 8 month low but TLT (Bonds) are making a 16 month high. The price action the market seems easily headed for more downside with some violent bear market rallies along the way for the shorts. We are getting deeper into the summer which are historically poor months for market performance. Bob Prechter has called this deflationary market environment about as well as anyone over the last few years. Prechter says now is the time to sell the dollar, buy Francs and expect a minor bounce in the S&P. But don’t be fooled, he thinks the bear market is continuing and that stocks have much lower to move over the longer-term.
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