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Epidemic of head shoulders on the big indexes

Many analysts know these H&S, I just make an inventory of the different H&S on the various indexes. I have already worked on this subject in September, 2003, it seems to me interesting to make an update of this study to know where we are at present with regard to these H&S.

I. Explanation.
For those who do not know the technical analysis, the figure of head shoulders is a very effective figure of the technical analysis. It is a figure of reversal of summit. There is a first summit which is the left shoulder, then a more important summit which is called the head and the figure ends with the right shoulder the size of which is the same that the left shoulder. This figure also exists in the Japanese technical analysis, her name is the figure in three buddhas. To calculate the objective in the decline, it is enough to look at the height of the head, she indicates the objective of the decline from the break of the line of neck.


II. Head shoulders.

- SP500, the USA :
The line of neck is just below 1000 points. This zone is a very important support. If sp500 pass down, it is a very strong bears signal.
The line of neck, under the summit, is 950 points, as for the summit, he is in the zone of 1550 points : 1550-950=600 hurt, 950-600 = 350 points.
The objective is in the zone of 350 points.


- DAX, Germany :
The German DAX has too a very beautiful figure in head shoulders. The line of neck is in the zone of 3100 points.
It is not possible to calculate an objective for the DAX (the obtained result is 0 points).

 

- England:
The line of neck for the English indication is in the zone of 3300 points.
The line of neck, under the summit, is 4500 points, as for the summit he is in the zone of 7000 points : 7000-4500=2500 hurt, 4000-2500 = 1500 points.
The objective is in the zone of 1500 points.

 

- CAC40, France:
The CAC40 stayed below its line of neck.
The line of neck, under the summit, is 3500 points, as for the summit he is in the zone of 6750 points : 6750-3500 = 3250 points, 3500-3250 = 250 points.
The objective is in the zone of 250 points.

 

- Canada :
The line of neck is in the zone 7500. But this head shoulders in a very small right shoulder and the line of neck was hardly broken. Then, the index had a very strong bounce on this line of neck, I am not on that this figure of head shoulders is valid. To validate it, the index would have to pass durably below 7500 points.

 

- Holland :
It is a very beautiful figure head shoulders, even if the second shoulder is a little bit small. The index stayed below the line of neck.
The line of neck, under the summit, is 400 points, as for the summit he is in the zone of 700 points:
700-400=300 hurt, 400-300 = 100 points.
The objective is in the zone of 100 points.


MIBTEL, Italy :
The figure of head shoulders is very net, and the index is above the line of neck.
The line of neck is in the zone 18 000, the break of this support is a signal very bears.
The line of neck, under the summit, is 18 000 points, as for the summit he is in the zone of 34 000 points: 34 000-18 000 = 16 000points, 18 000-16 000 = 2 000 points.
The objective is in the zone of 2 000 points.


MSCI, Index World:
The figure head shoulders is very well built even if the index is at present above its line of neck. The line of neck is in the zone of 730 points, it is a resistance important to watch.
The line of neck, under the summit, is 700 points, as for the summit he is in the zone of 1 150 points: 1 150 - 700 = 450 points, 700-450 = 250 points.
The objective of the head shoulders is in the zone of 250 points.


III. Interpretation.
- There are many world indications which have figures heads shoulders, the USA, Germany, England, France, Canada, Holland, Italy and even the MSCI which is a world index. The Asian indications seem saved by this epidemic of head shoulders.

- The objectives of the H&S are very low, and even sometimes impossible to calculate as for the German DAX. The SP500 gives the best vision of the objective of the decline.

- This analysis just suggests counting the H&S on the various national indications, later it belongs to you to decide on the importance to be granted to this figure on national indexes.

- Certain indexes are rehearsed above their line of neck, but it invalidates by their objectives in the decline. Only the French and Dutch indexes stayed below their line of neck.

- It is necessary to watch the line of neck of these indexes, it represents a bear signal very hardly that many analysts watch.

- The Canadian indication is the only indication which pauses problem. I am not sure on his validity but I prefer to include it all the same in this study. I shall soon explain you more in detail the reasons of this doubt.

This paper is just a report on different index and their situation. The most important indexes seem to have a figure of head shoulders with very important objectives of decline. Now, it belongs to you to see if these figures seem to you credible.
Be carefull!! It is about a personal opinion and thus this analysis is to consume with the biggest moderation.

Dr Chaize Thomas

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