Chart Advisor: Sand P developing head and shoulders?

[#1]

The chart for the S&P 500 SPDRS (NYSE:SPY) ETF reveals how the markets broke under the small trading range they established after the recent move to new highs. While SPY remains above a rising 50-day moving average, it remains under the recent highs, and could be in the process of developing a head-and-shoulders top. It's too early too call this pattern, but it's possible that SPY is in the process of forming the right shoulder

[pb41]

Interesting observation. However here is an alternative short-term bullish view from Carl Futia at http://carlfutia.blogspot.com/ Unfortuntely the chart he refers to cannot be shown here. "Here is a 60 minute bar chart of day session e-mini trading. The market has accelerated above the high of today's range estimate at 1010. I think this means that the move to 1054 is underway. If I'm right about this reactions along the way should run no more than 10 points or so. Right now the breakout level for this up move is at 1002 (blue dotted line) and this should be very strong support for any reaction. Next minor resistance on the way up is at 1015 (red dotted line), the midpoint between the 1291 high of September 2008 and the 739 low of November 2008 as well as the level of two recent intraday lows. Once the market moves past 1015 it will confirm my suspicion that the supply shock that hit the market Tuesday was just a successful attempt to shake out weak longs and to build up an aggressive short interest in the market. If so, the move to 1054 should be a quick one because a great deal of technical strength has been built up by the shake out. I am sticking with my view that the e-minis will reach 1120 by the end of October."

[pb41]

Some more information by Carl Futia on why he expects a move upwards: "Normally a supply shock transfers a large number of contracts from longer time frame traders to relatively short term traders, more contracts than the short term traders collectively want to hold in their long positions. Consequently prices must subsequently fall quite a bit further. They must drop to the point at which longer time frame traders again become willing to take over the long positions that short time frame traders don't want to hold. This usually involves a big move in prices. Supply shocks typically kick off extended trends that have few reactions. When a supply shock is instead followed by a balanced, quiet, and trendless market I begin to suspect that things are not as they seem to be. It begins to look like the selling from longer time frame traders was really an attempt to drive the market lower, to shake out weak longs from their positions and to attract short sellers to the market. The fact that the market is trading sideways and has not rallied is more evidence that the longer time frame bulls are trying to tire out the weak bulls and entice selling by short term bearish traders. All the while these longer time frame traders are building a long position which will cause a very substantial up move from current levels. But first I think the period of accumulation that began Tuesday afternoon will end with a terminal shakeout. I expect the market to make a quick trip below the 990 level, probably into the 980-85 range. Tomorrow's employment number should provide a good excuse. Terminal shakeouts are usually followed by fast moves in the opposite direction. I think the e-minis will move quickly back above the 1000 level on Tuesday (Monday is a holiday in the U.S.). This should prove to be the early stage of a move to the 1054 level."