The S&P 500 seems to be in a holding pattern now, as price builds out horizontally to form the right shoulder of a larger head and shoulders. The head of this potential pattern was formed 4/11/13, while the left shoulder was formed during the period of 3/6/13 – 4/5/13. Putting this pattern into context of price levels, the upper end of the range should be roughly $1,567 in the S&P 500 futures and the lower $1,530, but all is not lost in a horizontal market, trade what the market gives you.
There are a variety of options trades that can be put on in the ETF and potentially futures markets in order to capitalize on this thesis. One of which includes an iron condor. The short strikes of the trade could potentially be the aforementioned levels, naturally capped off by another long option…which would benefit should we move horizontal
Should the head and shoulders in the S&P play out, the symmetrical end of the right shoulder may be around 5/11/13. This would mirror the time spent on the left side of the pattern. And lead to lower prices.
