Stocks have rejected our head and shoulders pattern from yesterday. This is why you wait until the second shoulder has fully formed to trade this pattern. The neckline, 4122, was the make-or-break point, and the S&P ended up getting a lift from this level to retrace almost to highs at 4188. We are seeing some resistance from a collection of relative highs at 4174. We are likely to form a sideways consolidation pattern like a bull flag or bull wedge before breaking out higher. Strong momentum at open could give us new highs, but 4188 will take some juice to pierce through. Watch 4122 for continued support if we retrace.
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