Chalk up another one for the bears. A mid-day rally on news of further assistance being sent to Fannie and Freddie, while also helping existing home owners in trouble of defaulting on their mortgage. The news that broke mid-day actually saw the markets erase most of its losses, only to see the bears, once again, pounce on the hopes of those that bought the news.
Lots of talk swirling about a potential inverse “head-and-shoulders” pattern that is emerging, and there is truth to that. But the things that concern us about this – one is, too many traders and investors recognize the pattern, and are clinging to it as a beacon of hope; second, the pattern developed over a very short period of time (about one month) and the price range in which it is formed is very broad (over 150 points on the S&P). This leads us to believe that this developing pattern could be another head-fake that takes the ever so anxious bulls on for another ride down the slope of hope.
So be careful of the technical chatter of this well-known and well-recognized pattern emerging, as we believe that it could, in fact, be fool’s gold.
Here’s the Nasdaq and S&P charts…