How to read the S&P?

The world markets have continued to gyrate with ferocious volatility.   But it has been a case of much ado about nothing thus far, at least in the U.S., as the major indexes have failed to escape the wide range of the last month.  I see two interesting, and very different, ways to read the S&P chart at first glance.  If we move lower from here, it would appear that we are on the way to putting a second, smaller, Head and Shoulders pattern in place.

On the other hand, we could be witnessing the formation and growth of an upward channel.  We have had higher lows since the initial thrust lower in early August.  We have also seen higher highs with the last two cycles.

That makes this cycle pretty important in the mid-term.  I remain in the longer term bear camp, and the volatility only confirms that belief  in my mind.  But a longer term bear doesn’t preclude the possibility of a rally in the interim, especially if the Fed gets aggressive with another (ill-advised) dose of quantitative easing.

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