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So stocks are once again trading back to the all-important 1050 level on the S&P 500, the neckline of the head and shoulders pattern everyone and their mom was watching last month.
What’s interesting about this test is that another head and shoulders pattern has formed in the meantime – this time inverted (bullish) – and far fewer traders are taking notice:

This chart, along with the growing aversion to equities, has me feeling more bullish right now. 
However, the pennant I’ve been watching for the past few months has just broken down:
I’ve been looking to this chart which plots the relative performance of the financials to give some hint at the future direction of stocks for some time
Its recent breakdown makes me a cautious bull. I’ll still be watching it over the near term to see if it can pull off a reversal. This and the Dollar Index to see if the rally over the past couple of weeks is for real (which would be bearish).
Because it’s do or die right now for both bulls and bears. Break them down below 1050 or hold it and reverse higher. What happens right here right now lays the groundwork for the rest of the trading year.

Disclosure: Long FAS

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