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Wednesday, 7 November 2018

Rallying Into FOMC

Last week I was talking about a backtest into the 5dma / 50 hour MA support area and we saw that, and another leg up over the daily middle band and the 50% retracement level that brings SPX up into resistance at the 61.8% retracement level at 2812 and the September rally high at 2816.94. I have a decent looking rising wedge from the low that has slightly overthrown wedge resistance and a lot of negative divergence on the 15min chart particularly. SPX 15min chart:
So what next? SPX is at significant resistance here, with the next level up over that resistance at the 50dma in the 2835 area. These are both significant resistance and either may well hold. I'd note though that if we were to see a serious break up over the 50dma, then I have marked up a possible IHS that has formed and broken up today with a target in the 2910 area. If SPX should spend any significant time over 2850, then that 2910 would be a credible target.

On the big picture we are likely soon to see a significant backtest on SPX, and that may extend lower into a full retest of the October low. If seen that may extend further into a retest of the 2018 low at 2532.69. Alternatively we might just see a partial retracement of the rally so far, and whichever way that goes we should then see a choppy sideways to up market into January. After that we should expect another big leg down and depending how that goes, 2019 may be a flat or red year like 2011 or 2015.  SPX 60min chart:

Wednesday, 31 October 2018

Just the Stats Ma'am

The close on SPX yesterday was a clear close back over the 5dma, and as it has been a decline of more than 2% since the last break down, that puts SPX back on the Three Day Rule. That means that if SPX should deliver a clear close (4/5+ handles) back below the 5dma, currently at 2684, today or tomorrow, then SPX would very likely retest the October low in the following few days.

When SPX is trending in either direction I watch the 5dma and the 50 hour MA for trend support or resistance. The 50 hour MA is currently in the 2694 area, so that and the 50dma give us the short term support area.

On the resistance side there is a possible IHS neckline in the 2725 area, and that's still in play potentially if SPX breaks back under the 2685-95. That would have an ideal right shoulder low in the 2651/2 area, but in practical terms in the event of a daily close back under the 5dma SPX would likely deliver at least a new retracement low.

Higher resistance and a very possible target area for this rally if reached quickly are the 200dma and daily middle band, both currently at 2765, and the 50% retracement of the decline from the ATH in the 2772 area.

Our overall lean here is that we are expecting this rally to pull back shortly, very possibly into the 2680-2700 area, then go higher, very possibly into the 2760-70 area. SPX may well then fail into a new retracement low before the main rally begins. This current rally would therefore be what we would normally describe as 'the high before the low'.

It is possible though that the short term low may be in. I'd note that the daily stats lean bullish every day between now and FOMC next Wednesday, and there is already a possible asymmetric double bottom that has broken up with alternate targets in the 2785 and 2810 areas.

SPX daily 5dma chart:
SPX 60min chart:
Stan and I are doing our monthly free public Chart Chat on Sunday this week, and obviously that's likely to be an interesting edition. . If you'd like to attend, you can register our November Free Webinars page.