We just started a new month, a new beginning. Hardly new, the market is still trading in a neutral range. The possibility of an H&S is still present, though this pattern takes months to form. For those that believe the H&S pattern is hocus pocus, let me remind you that the pattern marked the top in 2007 with a neckline break on the 1st week of January 2008. As a short-term trader, I have to take advantage of intra-day and multi-day swings, prior to any breakdown (or a rare failed pattern breakout).
Besides the magical lines on the charts, keep an eye on the 20- and 30-day MAs. We've been trading in this narrow range for the past 3 days. The 20 is located at 924 and the 30 is at 919. For the day, I will focus on the 905-928 range. For the intermediate, I would focus on 895-930.
I took a look at the breadth charts, mainly the NYSE NH-NL's ($NYHL), NASDAQ NH-NL's $NAHL, VIX, NYSE A-D line ($NYAD) and the NASDAQ A-D line ($NAAD). The New Highs-New Lows Index is on it's largest cumulative positive strech since the bear market started. The VIX is back to pre-crash levels.
The most interesting thing that I found was when I compared the NYSE and NASDAQ (COMP) indices with their respective Advance-Decline (A-D) lines. The COMP is outperforming the NYSE, however, if you look at the A-D lines, the NYSE internals have fared much better.
Finally, on the bearish side, the European indices ($DAX, $CAC, $FTSE) are all forming bear flags. The 20-day MA served as the principal support level for all three, but they have now turned into resistance.The Asian markets are still level.
