By Jerry Furst - Sr Analyst “1st on Forex”

US Economy Going and Growing Up Fast? -  Not So… Fast!

The Consensus Range for Friday’s  US GDP  is -2.8 to 0.7, with a consensus number of -0.7%  growth . This is highly optimistic since last month’s GDP number came in at a negative -5.5%. The “rose colored glasses and windows” crowd would love to claim the worst is over.

Jobs is the Answer

The reality is that the jobless rate is still ugly and new jobless claims are still rising. Anecdotal  talk of extended benefits being pulled back may soon paint a inaccurate picture that the jobless rate could be artificially made to look better - sooner – as continuing unemployment claims will be dropping soon as benefits expire and people fall off the unemployment benefits list as “no longer seeking employment”.

S&P 500 test of 1,000 Imminent ? and then Lookout Below?

The S&P 500 is flirting with 1,000 – A significant psychological support – resistance level.

My previous post of July 16^th showed the S&P 500 grinding towards the 956 neckline of a massive Inverse Head and Shoulder Pattern going back to January, and the Failed Head and Shoulder of the past few months.  That target was quickly achieved a few days later and promptly blasted up targeting the 1,000 mark.

S&P 500 4 Hour Chart (click to Enlarge)

This may indeed have been a significant short squeeze. If this 1,000 level is not significantly breached to the upside, then the weaker short positions that were just squeezed may have been removed – possibly clearing the way for a massive move down?

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Jerry Furst  is an active trader, educator, and Founder of Investors Education Network (IEN), He is a Mentor and Trading Coach to Select Clients  Click Here for a Free Self Evaluation Survey.

By Jerry Furst - Sr Analyst “1st on Forex”

Investors Education Network.com

Currencies at the Crossroads - S&P - VIX to Show the Way?

The correlations of the currency markets tied to the SP 500 seem to be holding quite well.

There seems to be a major media campaign scrutinizing the “Head and Shoulders”  patterns on the S&P 500. CNBC’s Mark Haines smirkly quizzed some technical analysts on Thursday asking, “so what happened to your head and shoulder pattern?”  -

Childish Patterns - Misunderstood

 John Authers writes in the The Financial Times on Friday that, “It is absurd to look at childish patterns when weighty issues afflict us. ”  Ahhhh…. Pitty the fundamental, long term,  buy and hold,  MBA  clinging to their PE Ratios to understand the valuations of their paper. If one thing is clear, mis statements and re-statements of sales, earnings, and future guidance (not to mention analysts recommendations) etc…. mean barely anything compared to….

The Charts Don’t Lie - Statistically Speaking

The point at which buyers and sellers agree are plotted on the charts for all to see… and these plot points form recurring patterns over time that have certain degrees of predictive accuracy - statistically speaking…

Head and Shoulders on the S&P 500 - correlated to the VIX

Daily Chart above on the S&P (click to enlarge) is showing a Inverse Head and Shoulders Pattern with a Neck Line of 956 - (At least that’s where I draw it) which coincides with the 200 period moving average. This denotes 200 SMA is a strong Support and Resistance zone - all on it’s own.

The 4 Hour Chart brings into focus the head and Shoulders of Great Debate

Lot’s of Technical Analysis naysayers (Haines,  Authers) are smug about the failure of the Head and Shoulder pattern to complete.  The issue I have with most of their commentary is that they are missing a key point regarding technical analysis - price will either “Bounce or Break” off of these neck lines. Once this “B or B” is confirmed, we have “potential” targets.

4 Hour S&P 500 chart (click to enlarge) Note that “the Bounce” off the neck line has targets of the top of the right shoulder (already exceeded) and now has a “double top” target that coincides with the “neck line”  of the “inverse Head and Shoulder of the Daily Chart.

So What…s Next???

Everyone’s talkin about these Head and Shoulder patterns…. As they will be triggering lots of technical trades in the next week or two.  So what can we use for correlation?

Enter the VIX - Volatility Index & Fibonacci

The Fear Index on the Weekly chart tapped a May 2006 support level just above 24 - which coincides with a 38.2 Fibonacci retracement - If the naysayers don’t like Head and Shoulder Patterns - I wonder what they say about Fibonaccis!

Weekly VIX Chart (Click to Enlarge) - Shows a strong support level - that if it starts to “Bounce Up” could be the “Heads Up” for the Head and Shoulder pattern to “Head Down” - Possibly making a Double Bottom to the March Lows - But…. Watch the VIx to Point the Way….

Happy Pippin…

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This week may see more trading volatility again - as we have seen in the past. Last Weeks dismal unemployment numbers ahead of the July 4^th Holiday gave a boost to the US Dollar as money came out of equities and into the safe refuge of the “Holding Tank” of the Currency.

July 6 - 10 2009 - US Calendar

Not much news scheduled until the end of the week.

7-6: Monday - ISM Mfg Index and some Treasury Auctions

7-7: Tuesday - US Treasury Strips

7-8: Wednesday - 10 yr auction and Consumer Credit Report

7-9: Thursday - Weekly Jobless Claims - Wholesale Trade

7-10: Friday - Trade Data - Import-Export Prices - Consumer Sentiment

 July 6 - 10 2009 - International Calendar - Highlights

Interest Rate Announcements from Australia, and the UK, Employment Data from Canada - Stay Tuned

Yen Gains on the Majors

The Yen has made significant gains against the US Dollar, Euro and Pound as Asian stocks were falling as the week gets under way.

Jerry Furst  is an active trader, educator, and Founder of Investors Education Network (IEN), He is a Mentor and Trading Coach to Select Clients  Click Here for a Free Self Evaluation Survey.

Tune in to the “1^st on Forex” Webinars on FX Street

Every Monday - The Week Ahead at 16:00 GMT (12 Noon Eastern)- Click Here