As picture-perfect as this bearish head-and-shoulders pattern is (see inset), a sharp feint higher over the next day or two would render it harmless. The hypothetical rally that I’ve sketched achieves 232.50 or so, which is what it would take to neutralize the pattern and put bulls back on the warpath. Bidding on Friday was undeniably spirited, implying that the institutional chimpanzees doing the buying have finally shifted back to ‘value’ from ‘growth’, just as they’ve been advertising they would for the last couple of weeks. Assuming they really mean it, IWM should have little trouble mustering the kind of rally that will turn bears who have enjoyed watching the H&S pattern take shape into short-covering madmen. _______ UPDATE (Apr 29, 10:03 p.m. ET): Just a few more bars higher or sideways will alter this bearish head-and-shoulders pattern sufficiently to negate its killer power. Time for it to put up or shut up.
IWM – Russell 2000 ETF (Last:227.99)