SPX: Neckline Retest

We looked at this chart (and intraday charts) at the end of April and early May, when the SPX was breaking out of the Symmetrical Triangle (pattern in blue), which also was the Right Shoulder of a Bullish Inverse H&S pattern. The pattern not only broke out, there also was a successful retest of the top of the pattern. The Bulls took it higher from there and scored over 60 points. The Symmetrical Triangle target of 918.30 got MADE during the rally.

Since then, the SPX has been consolidating those gains in the pattern in black, the outcome of which is yet to be determined. Here are some possiblilites:

1. The pattern "could be" a Symmetrical Triangle if the missing Data Point #4 holds above the low of Data Point #2 and The Bulls can take out the top of the pattern. Symmetrical Triangles have "Lower highs" and "Higher lows."
2. The pattern "could be" a Bull Flag if missing Data Point #4 is below Data Point #2. Bull Flags have fairly parallel trendlines, and have "lower highs" and "lower lows."
3. The pattern "could be" a bust, with the SPX simply going down...down, below the neckline, without any pattern formation at all.

As the chart stands, it's bullish until we see something different.

Similar to the current Bullish Inverse H&S breakout, we had a DOUBLE Bullish Inverse H&S breakout in late April, 2008, which also took out the down trendline off the October, 2007 high. The patterns also could be seen as a Bullish Inverse H&S and an Ascending Triangle, if one prefers.

When patterns break out or break down, they need to be monitored for signs of trouble along the way, particularly when the breakout is against the trend, as this one was. What kind of evidence would we look for? Well-ll...

1. The DOUBLE Bullish Inverse H&S pattern morphed into the Bearish Rising Wedge, in May, 2008 (the pattern in black), and broke down.
2. A Bull Flag formed after that (pattern in red), which is an "upside down" Bear Flag. "Lower highs" and "lower lows." That "should have" broken out to the upside. It broke to the downside.
3. As we know, Bearish Rising Wedges often "morph," or change, into Bearish H&S Tops, as this one did (the horizontal blue line is the neckline).
4. After the neckline of the H&S Top broke, the SPX went down and also took out the low of The Head: 1256.98.
5. From there, the SPX staged a Bearish Rising Wedge rally back to the broken neckline, but that broke to the downside.
6. There were TWO failed attempts to retest the bottom of the Bearish Rising Wedge.
7. After a sharp break to the downside from those failed retests, the SPX rallied for a retest of The Head of the "Bullish" Inverse H&S pattern: 1256.98. No good.

We can see how they "pulled the plug" on the SPX from there. That was a lot of bearish evidence of breakdowns, and failed retests of breakdowns and a lot of good opportunities to get out of long positions, and/or to short the SPX.

That outcome in 2008 certainly doesn't mean that we will have the same bearish resolution in the current time-frame. Again, the current chart of the SPX is bullish "until it ain't." LOL. I just wanted to discuss the kinds of things that we would look for that would tell us that "it ain't."