A whole lot of nothing yesterday as bulls take a breather. A pullback of some degree is near and could start anytime now. But the most important period is around the Labor Day weekend where an important "turn" should happen. If the current high hold then the new falling white trendline will be resistance on the rally back up after the expected pullback. While it's really hard to know for certain where this rally will end it's possible that it's ending now and that we'll start down soon and bottom around the end of the month with a fast short squeeze up right after the Labor Day weekend for a lower high then this first rally up. Here's what I mean...
As you can see the pullback will make a nice right shoulder of an inverted head and shoulder pattern. It will look very bullish as the next move up would trick a lot of bulls into looking for new all time highs from that pattern. But if it fails it will turn into a nasty wave 3 of C down, and catch a lot of bulls off guard. The best inverted head and shoulders patterns work when the market is near a bottom, not the all time highs. The October 27th, 2023 low was a beautiful right shoulder with the head on October 13th, 2022 and the left shoulder on February 22, 2022. That was a large inverted head and shoulders pattern from a low, which the right shoulder pierced the 200 days SMA, so odds were high it would breakout, and it did.
There was another inverted head and shoulders pattern closer to the low, which had the same head of course and a left shoulder on June 21st, 2022, and two right shoulders, one on December 22nd 2022 and the other on March 13th, 2022. The weekly chart was oversold at both right shoulders, but that's not the case right now as you can see below...
My point here is that "if" we do pullback for a right shoulder into the end of this month the technicals don't support the inverted head and shoulders being successful and breaking out hard. It's near an all time high and the MACD's are overbought still, and the RSI is close to overbought too. I don't know whether this will play out or not but it certainly could and something to watch for sure.
Have a blessed day.
