Bull Warning

From Bloomberg:

S&P 500 Index May Retreat 17% to Reach 900 Level: Technical Analysis

The Standard & Poor’s 500 Index may fall 17 percent to the lowest level in a year after the measure formed a head-and-shoulders pattern, according to a technical analyst at SEB AB.

“The market is going to have a tough time moving much higher,” Anders Soederberg, chief technical analyst at SEB in Stockholm said today in a phone interview. “Everybody has been looking at the big head-and-shoulders developing. If market support erodes at 1,038-1,040, which is the neckline to this pattern, and this time finds staying power beneath it, that puts us back on track to reach about 900 in the next two to three months.

A head-and-shoulders pattern occurs when share prices form three consecutive peaks, with the middle being the highest. The start of a decline is signaled when prices fall below a support level in line with the low points between the peaks.

“S&P trading volume increases on down days and the 50- and 200-day moving averages have had a bearish cross. Both indicate the index is set to fall.


It appears I am not alone in the assessment of a bear market.  While I expect a short term rally with the S&P reaching the 1100 to 1110 range, the longer term trend seems down.  To look at the bigger picture we need to do a review of history, which will be the topic of my next post.