I've been writing a lot about the head and shoulders bottom in the S&P 500 ($SPX). With today's advance past the 1405 level, the S&P 500 is finally breaking out above the neckline of the pattern.

Many, many technical analysts are following the 1400 level, plus or minus a few index points; therefore, I wouldn't put too much weight in the breakout. Such closely watched levels usually have a way of confusing the majority of traders. So, I wouldn't be surprised to see some volatility in the coming sessions.

Still, there are a lot of good trends out there in individual stocks, surprisingly both up and down. There's a massive rotation going on right now with stocks up, bonds down, the dollar up, and commodities down. This rotation is causing a lot of movement beneath the surface. Take a look at two recent patterns I posted and see where these stocks are trading today.

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Google (GOOG) is Forming Tight Flag After Gap Higher

There's no doubt that the bubble has burst in the Chinese stock market. The China 25 (FXI) exchange traded fund is off by about 28 percent from its highs last year.

But in the short-term, the FXI might stage a counter-trend rally thanks to the head and shoulders bottom that has formed over the last four months. The left shoulder of the pattern is around $140, the head at $120, and the right shoulder at $140. The neckline of the pattern is around $155, plus or minus a few dollars. It appears as if the FXI is breaking out above the neckline of the head and shoulders bottom today.

Make no mistake about it, this is very much a counter-trend rally that goes against the longer-term downward trend. But it might be a trade that works over the next few weeks. Still, exercise caution and be quick to take profits. A short-term price target is at $170; a longer-term bullish price target is at $190. Both of these price targets are derived from the head and shoulders bottom.

Every technical analyst on Wall Street is watching the 1400 level in the S&P 500 ($SPX). This level is the neckline of a head and shoulders bottom which, if broken, could unleash a massive rally.

Last Friday's rally took the S&P 500 right up to the 1400 level. But the index has since sagged, which isn't entirely unexpected. The S&P 500 was overbought in the short-term, having come all of the way from 1325 last week. So, a little consolidation and retracement isn't out of the ordinary.

The next few days will be important, though, as the bulls need to see the pattern of higher highs and higher lows continue. This pattern has been in place since mid-March. If it continues, the next higher high should lead the S&P 500 above its neckline.

Be prepared with a buy list if the S&P 500 breaks out above its neckline. But you can be patient and wait for confirmation because there's still a chance of the S&P 500 breaking down.

Earlier this month I pointed out a head and shoulders bottom across the broad market averages. With today's rally, the pattern is pretty close to breaking.

I looked at the head and shoulders bottoms in the S&P 500 ($SPX) and Dow Jones Industrial Average ($INDU). If you look around, you'll see other head and shoulders bottoms in indexes and individual stocks. Examples of other head and shoulders bottoms include:

Housing Stocks

Wells Fargo (WFC)

NYSE Euronext (NYX)

Looking at the S&P 500 specifically, the head and shoulders bottom would complete if the index can break above 1400. This is a much-watched level among technical traders. With so many traders watching this level, it might prove to be a sloppy break if and when it comes. Nevertheless, look for a breakout next week to lead to further upside in the broader market.

I've been observing a lot of head and shoulders bottom patterns over the last few weeks. Another one is forming in shares of NYSE Euronext (NYX).

The left shoulder of the pattern formed in late February at the $65 level. The head of the pattern is at $55, which formed in mid-March. The right shoulder, also at $65, formed over the past week.

The neckline of the head and shoulders bottom is at the $70 level, which was also support in late January.

If the pattern is confirmed, a short-term price target is at $75; a long-term price target at $85.