S&P 4600? HEAD AND SHOULDERS FORMING
E-mini S&P 500 Futures CME_MINI:ES1!
jgavrity
The **S&P 500** index has recently confirmed a **head and shoulders** topping pattern, which suggests an **exhaustion of buyers**. Let's break down this pattern:
1. **Head and Shoulders Pattern**:
- The head and shoulders pattern is a classic price pattern that indicates a potential reversal.
- It typically consists of three phases: **setup**, **trigger**, and **confirmation**.
- In the case of the S&P 500, we've observed this pattern recently, signaling a bearish tone
- The pattern involves a failed attempt to make a new high, indicating buyer exhaustion or sellers unloading shares.
- Novice analysts sometimes label this pattern prematurely, so it's essential to wait for all three phases to minimize false signals.
2. **Minimum Downside Objective**:
- The head and shoulders pattern suggests a minimum downside objective for the S&P 500 around **4600*¹
- This means that the index could potentially decline to this level based on the pattern's formation.
3. **Seasonal Correction in May**:
- Historically, there has been a **seasonal weakness** in the stock market around May.
- The phrase "Sell in May and Go Away" originated from a long-term seasonal study, indicating that most stock market gains tend to occur during the autumn months.
- While April has historically been positive for the S&P 500, investors should be aware of potential corrections in May⁶⁷.
Remember that market patterns and seasonality provide insights, but they don't guarantee future outcomes. Always consider other factors and consult professional advice before making investment decisions.
