A very interesting development is taking shape on the daily US Equity Index Charts - there appears to be two distinct - and opposing - Head and Shoulders formations taking shape… and we’re at the break-out point of both patterns.  Let’s see these and what they might imply.

S&P 500 Daily:

I’ve never seen two such patterns form in the same price structure on the same timeframe - this is unique!

First, let’s start with the Inverse Head and Shoulders, which I’ve colored Green because it has bullish (upside) potential.  The formation is a slanted pattern, with current neckline around 825 to 850.  A break above that level would confirm the pattern… though we’re actually having a break (currently) in the opposite direction which is disconfirming the pattern.

The Left Shoulder (LS) formed in October with the Head (H) forming at the November Lows.  The final Right Shoulder (RS) formed with the January lows and I saw this pattern discussed across different blogs so I know a lot of people were looking at it… but currently the pattern is failing (for the moment).  If the pattern were to complete (reach its objective), the upside target (with a break above 825) would be about 150 points higher than the neckline, which would take us to around 1,000.  That’s the distance from the head to the neckline which is then added to the downward sloping neckline (not drawn).

However, a second Head and Shoulders pattern - a smaller pattern - has formed from the December Highs (LS), January highs (H), and February highs (RS).  This pattern’s neckline is also downward sloping and is currently around 775.  We seem to be testing that trendline (neckline) at the moment.  If this pattern is the dominant one, then we would expect a 125 (estimate) down-move off the neckline (at 775) which would take us down to 650.

Keep in mind these figures are very rough estimates - you’ll need to do deeper work to set your own possible (and more exact) targets.

The market is so tightly wound right now and there’s opposing methods of analysis that say we’re headed higher while others say we’re headed lower.  I think the strange simultaneous formation of two opposing Head and Shoulders patterns underscores this point.  For the time being, it seems the bias is still to the downside, but with the market so on edge, it’s probably best not to let a bias or viewpoint cloud your objective thinking.