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Friday, 5 June 2020

America Is Burning - Buy!

SPX made it to the 3100 area as expected, and a bit higher, and is now at the last big inflection point area before a retest of the all time highs. Why is this a big area? Well this is the last big fibonacci retracement level, and there are two significant high levels here, the first rally high after the all time high at 3136.72, and the November 2019 high at 3154.26 made on the move up to the all time high. A break over these levels is fine, but if 3154.26 is converted to support then that opens the way for a possible test of the all time high at 3393.52. That's a real possibility now, but we should at least see a retracement from this area.

SPX daily chart:
In terms of the SPX hourly chart, SPX has now arrived and is testing an ideal possible rising wedge resistance trendline. As this is a rising wedge that can overthrow at the high, but on a break below rising support, now in the 2980 area, we should at least see a decent retracement into established support in the 2760-70 area, close to the 38.2% retracement of the rally so far. A higher high on SPX today should set up a strong hourly RSI 14 negative divergence.

SPX 60min chart:
On the 15min chart the smaller rising wedge from that established support and specifically from the May low at 2766.64 is also looking good and the low yesterday was at that rising wedge support trendline.

SPX 15min chart:
The NDX chart is concerning me a bit here as NDX has been lagging SPX the last couple of weeks. The minimum target at the retest of the all time high has now been reached, but the ideal target at a test of rising megaphone resistance, now in the 10,150 has not yet been reached, and might need to be. Watching for signs of reversal.

NDX weekly chart:
Unless something really unexpected is happening SPX should be topping out here for at least a decent retracement. If that delivers the next big inflection point would likely be at the retest of the May low in the 2766 area. To set up that move might well require a decent initial retracement back into the 3000 area and then a retest of this high to set up negative RSI 14 divergence on the daily chart.

Stan and I are doing our monthly free public Chart Chat covering the usual wide range of markets and instruments at theartofchart.net on at 4pm EST Sunday. If you'd like to attend you can register for that here.

Monday, 1 June 2020

Staying On Target

I tweeted an excerpt from my premarket video on Thursday last week where I was talking about the ideal path for ES over the coming days and the plan was to see a high respecting a trendline then in the mid-3060s, seen on Thursday afternoon, then a retracement into the 3000 area, seen on Friday, and then a push into 3100 area for the middle of this week, currently in progress. With the historical stats for today and tomorrow both over 70% green on SPX, I'm thinking that level might be seen before the close tomorrow. We'll see.

In the short term I have short term wedge resistance on the SPX 15min chart in the 3085-90 area, and that is the next obvious target.

SPX 15min chart:
If that hit is tomorrow then that might be hit with my (currently still theoretical) larger rising wedge resistance, currently in the 3100 area, with the IHS target also satisfied there.

SPX 60min chart:
On the bigger picture the other main target that I am watching here is the rising megaphone resistance on the NDX weekly chart. I would very much like to see that target hit for an ideal short setup and NDX will need to pick up the upward pace to make up for last week's underperformance.

NDX weekly chart:
As this high forms I will be looking for negative divergence on the SPX hourly RSI 14 and the SPX daily RSI 5, ideally with some NYMO divergence.

SPX daily chart:
Support on SPX is at the 5dma, currently at 3031, the weekly pivot at 3027, the hourly 50 MA, currently at 3004, the 200dma, Friday's support and currently at 3003, with the other support on a clear break below 3000 at the monthly pivot at 2960, main rising channel support, currently in the 2940 area, and the daily middle band, currently at 2931.

Will we see a high when we make these targets? I think that's likely yes, but it may take a while topping out and history suggests that SPX might be at the top end of a trading range that could hold SPX for two to four months before a likely lower low under the March low.

What about the contrary view that the bull market in SPX will just resume now and plough ever upwards? Well you never know, but it seems unlikely, as well as having no historical precedent. The economy is in deep recession, and that isn't likely to improve soon. Forty million americans have lost their jobs so far this year, and that figure is likely to increase before it starts moving down again. It seems like a strange kind of dark miracle under the circumstances that SPX has rallied this far and that I am looking for a new all time high on NDX today or tomorrow. I'll be surprised if this levitation lasts much further and if SPX does go into a trading range for the summer, that will give some more time for the grim economic reality to bite. Still expecting lower lows as that happens but keeping an open mind. This is a strange market and has been for years.

That said though the Fed has made it clear that they are standing by to help with any liquidity issues, but that they will not be helping with any economic contraction. As the next few months look mainly to be about a harsh economic contraction, it may not be that the Fed will be helping much with that. We'll see.

Stan and I are doing our monthly free public Chart Chat at theartofchart.net on Sunday. All are welcome and we'll be looking at the usual wide range of instruments across all the main trading markets. If you'd like to attend you can register for that here.