Head-and-shoulders starting to form on the S&P 500?

This is probably way too premature but the right shoulder of the S&P 500 could start to form if this week’s rally fizzles. I’m skeptical that it will last because it’s built on the idea of pricing out Federal Reserve rate hikes. We’re now below 50% fro the November Fed meeting so there isn’t much left to ‘price out’.

I’m also sympathetic to fading worries about a blowout on bond yields but I don’t know if anyone was really pricing in tail risks around 5% 10s anyway.

Again, it’s premature but if the S&P 500 starts to chop sideways and fade then there’s the possibilty. And if ti comes to fruition, the target would be a return to 4000. I think we’re going to need Fed cuts to get a sustainable rally but the Fed won’t be in a rush to cut until the market rolls over.

This article was written by Adam Button at www.forexlive.com. Source