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Monday, 14 October 2019

Much Ado About Nothing

ES has spent the whole of October in a low cycle but so far the action has been all sideways, with a strong rally last week taking SPX back close to the highs on the hope of a China deal. There was a China deal, albeit more of a glorified breathing space while more talks continue on the many tricky points of contention on which there seems to have been little or no progress so far, and there was good news for Soy and Lean Hogs, which are now cleared for purchase by China. With the asian swine epidemic having had such a severe effect on herds Lean Hogs particularly look like a very interesting long here.

In terms of equities though it's hard to see much holding SPX up here in the wake of the China talks, and with the low window having extended somewhat due to this sideways action, SPX is still in a low cycle until the last week of October, before a high cycle into late November and then a low cycle into March/April next year. The pattern setup looks good for a decline into the low window and I'm leaning towards a subsequent all time high retest into the high window at the end of November, possibly to make the second high of a double top.

In the short term ES formed a high quality rising wedge within a larger rising channel with the wedge breaking down on Friday. Key support is the monthly pivot at 2963.50 and ES has been trading slightly above that most of today. I'm expecting that to break, but it seems that might not happen today.

ES Dec 60min:
Ideally though that break would happen today as the daily middle band on SPX is just below monthly pivot, now at 2959, and on a break back over the daily middle band like the one we saw next Friday that is not going to be sustained, then the usual rejection back below comes in the form of a strong rejection candle on the next trading day. If the middle band is backtested today and holds as support, then we could well see a retest of Friday's high next.

SPX daily chart:
Is there a case for going a bit higher before going lower? Well yes. SPX could be forming an overall  bullish triangle here and, if so, the next obvious target would be triangle resistance, now in the 3015-20 area, before a retracement that might then only take SPX back halfway to triangle support in the 2830-5 area. That's a possible scenario here, but not the likeliest one. The setup for more downside without that however would be much improved by a break and conversion of the 2960 area back to resistance.

SPX 60min chart:
One way or the other SPX will likely move back onto an up cycle by the end of October , and the longer SPX spends going sideways in the meantime, the less ambitious any downside target should be. If we see a definite turn down in the next day or two then a target back in the 2800 area still looks doable.

Thursday, 22 August 2019

Onwards And Downwards

It's been a while since my last post and my apologies for that. It has been an intense summer of medical treatments for my wife, exams and results for my children, computer upgrades and so on. I've been feeling somewhat drained.

However the market has so far avoided being as tedious as it often is at this time of year, and, if I'm not much mistaken, then the next leg down on equities has started this morning from a short term reversal setup that is really one of the nicest that I have seen in quite a while. I was going through that in detail across SPX, ES, NQ, RTY, DAX and ESTX50 in the video below before the open this morning.

Today's Premarket Video from theartofchart.net - Updates on ES, NQ, RTY, DAX, ESTX50, SPX, NDX, RUT, CL, NG, GC, SI, HG, ZB, DX, :
The rising wedge that I was looking at on ES before the open has now broken down, and ES should now be on the way to short term double top support at Friday's low 2894. A sustained break below looks for the 2848 area.

ES Sep 60min chart:
I still have an open target below at the 2822.13 SPX retest and that is a 5dma Three Day Rule target, which was just missed on the last swing down because a triangle is likely forming here. In the cases of the previous two times this has happened since the start of 2007, that target was not hit before the retest of the previous highs (all time high in the current case), but they were both bullish triangles. This one should be a bearish triangle, so the 2822 target should be hit on the way to the next downside targets.

SPX 5dma chart:
I have sketched in the likely triangle on SPX and the obvious target for the wave D low is currently in the 2830 area. I'd then be looking for a limited rally, perhaps into the 2850-70 area, before the triangle break down, ideally towards the 2730 area for a more serious low there.

SPX 60min chart:
Stan and I are doing two free public webinars tonight, and if you are interested in attending either, or both, you can sign up for those on our August Free Webinars page. The first webinar is at the RTH close, 4pm EST, on My Favorite Setups Using Futures And Options - Part 3', and the second at 5pm EST is our monthly free webinars on FAANG stocks and key sectors.