S&P Forming Head & Shoulders Pattern

Published On: 12 December 2022, 9:45 AM | Jeraldine Tan, Senior Dealer

  • The Fed has been increasing interest rates to combat inflation which has raised cost of capital and hence should have a negative impact on companies in the near future.
  • Fixed income products look good on paper with interest rates moving up which would lead to outflow of hot money from Equities to Fixed Income.
  • In short, fundamentals are bearish.
  • On technicals, for context, S&P is in a downtrend on the longer term timeframe and is near the top of the trend channel and therefore bias is a downward continuation in the direction of the downtrend.
  • S&P is forming a head and shoulders pattern at this area which may present an opportunity for entering a short side trade at the break of the head and shoulders neck line around 3900, with target at recent low zone around 3750.

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