Who hasn't seen the head-and-shoulders top on the S&P? The top is there. The neckline would be tagged by a rally back to 1270-ish. To be a perfect head-and-shoulders pattern, the oversold rally ought to stop around 1275 and then fail. A rally above 1275 would not negate the pattern. Why? Because rarely are patterns so textbook in nature -- there tends to be a lot more gray than black and white.
The tops are still in place, trendlines are being broken, and while the market isn't oversold in the intermediate term, it is oversold enough in the short term to produce a rally. - H. Meisler
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