- WE'RE JUST RANDOM SPECKS OF DUST IN A TORNADO TO THE MARKETS .......
- CHARTISTS MUST PUT ALL BIAS ASIDE AND LET THE CHARTS DO THE TALKING OR WE'LL SEE ONLY WHAT WE WANT TO SEE
- This blog has a copy of all header posts that I publish anywhere, so that those interested in seeing what my thoughts are on the markets can find them easily.
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Thursday, 21 September 2017

So Rested He By The TumTum Tree

Stan and I are doing the first of two 'Trading Toolbox' free educational webinars an hour after the close today at theartofchart.net, and this one will be looking at the use of bollinger bands in day and swing trading. If you would like to attend then you can register for that on our September Free Webinars page. 

After an interesting start this morning ES settled down into the comatose tape that has been characteristic of afternoons recently. The morning was definitely interesting though, with the ES rising wedge support that was tested perfectly at the low yesterday breaking this morning. That hasn't followed through yet, but may follow through soon, ideally after just one more all time high retest. ES Dec 60min chart: 
The equivalent short term rising wedge support on SPX is now in the 2495 area and, as and when we see that, would be a confirming break. In the short term SPX has been testing trend support at the 50 hour MA, now at 2501, and that's holding so far. There is still a decent case, if possible, for a test of larger rising wedge resistance and that's now in the 2516 area. SPX 60min chart: 
Why would one more all time high be ideal? Well the last move up killed the negative divergence on the RSI 5 and it would be unusual to see a significant high without a daily sell signal on SPX. One more new all time high should set another daily RSI 5 / NYMO sell signal brewing. SPX daily chart: 
NQ is my concern here, as it is looking significantly wounded. A clear double top setup has made creditable efforts both yesterday and today to break down and if NQ can convert the monthly pivot at 5920 to resistance then NQ could start a serious slide down that would likely pull the other indices with it. On the bull side a 60min buy signal has fixed and is trying to reconfirm on the lower low today. If NQ can recover over the weekly pivot at 5985 then I still have an open bull flag target at the all time high retest (on NQ) at 6025. That could be a nice finish for this move, if NQ can manage just one more heave. NQ Dec 60min chart: 
Today and tomorrow are cycle trend days, which means that there are 70% odds that either buyers or sellers will dominate the tape. That didn't deliver today, which increases the odds that we will see a directional day tomorrow. Given the setup at the time of writing, that could go either way. 

This week's edition of The Weekly Call is posted and the model portfolio there is up 206% in the ten months to September 10th, now slightly over our target minimum 200% return over the first year. As that target has been reached we're thinking of making the strategy there a bit less conservative. That's a free weekly service and if you trade futures I'd suggest adding it to your reading list.

Wednesday, 20 September 2017

Frabjous Day?

If you don't immediately recognise the title for today's post then I must first warn you that your knowledge of Lewis Carroll's literary works is dangerously deficient.

So why am I thinking of Alice in Wonderland today? Well it is Fed day, and for me the Fed always bring Wonderland to mind. I was talking to my older son a few weeks ago explaining that in the same way that lawyers trained for years to achieve a state where they could swallow (figurative) camels and yet still strain at gnats, economists went through a process where after years of patient study that seemed to require at least a PhD, they achieved a state where measures that looked reckless or even suicidal to the less trained eye were revealed as both sensible and necessary.

He asked whether the Fed's track record at steering the economy in the past was impressive, and I told him that it had delivered a succession of ever greater disasters over recent decades. He then asked why people still nonetheless trusted the Fed to deliver policy, and I replied that people had to believe that the Fed knew what they are doing, as the alternative was just too terrifying. I added that the Fed never admitted to making a mistake, which reassured many, and that Ben Bernanke had an impressively bushy beard that had inspired confidence, though Yellen had needed to manage without one so far for technical reasons.

Having delivered a possibly fatal blow to whatever remained of my son's childish belief in the rationality of adults we moved onto other topics. :-).

I've been writing about a likely inflection point coming on equity markets for a couple of weeks now and we are in that inflection point now. The Fed meeting today, together with the expected statement on the gradual unwinding of the massive QE over the last few years, could obviously push markets in one direction or the other.

The pattern setup and cycles lean towards a bearish resolution here, and on SPX that is expressed in the 70% bearish rising wedge that is forming. Ideally I'd like to see a touch of rising wedge resistance in the 2515 area before any turn but the 2509 SPX target that I have been mentioning has already been reached (rounding up) with the two intraday highs at 2508.82 and 2508.85. That may be close enough. SPX 60min chart:
The ES, NQ and TF futures charts below were done two hours before the RTH open for Daily Video Service subscribers at theartofchart.net. If you are interested in trying our services a 30 day free trial is available here.

Trendline resistance on ES is in the same area, though I'd note that on ES that target trendline has already been tested. ES Dec 60min chart:
NQ has been the weakest of the three indices on the way up, and has managed to convert the weekly pivot to resistance, which is not encouraging for the prospects for further upside. I do still have an open bull flag target at a retest of the all time high at 6025, though after a number of near misses just below over the last week I am wondering if NQ can reach it before the expected turn downwards. NQ Dec 60min chart:
On TF, I would ideally like to see a test of 1450/1 before the turn as that would deliver a full retest of the all time high on RUT and a very nice looking double top setup there. TF Dec 60min chart:
Obviously there is always a choice to be made at inflection points and though this one very much leans bearish, price always has the final word and equities way go the other way and break up. There is no such thing as certainty in terms of price direction. That said, subject to whatever the Fed may be talking about today, deranged or otherwise, this is a nice short setup and I'm expecting this to break down. Tomorrow and Friday are both cycle trend days, so if we see a break downwards this week, that could be a strong move.

Stan and I are doing the first of two 'Trading Toolbox' free educational webinars an hour after the close tomorrow at theartofchart.net, and this one will be looking at the use of bollinger bands in day and swing trading. If you would like to attend then you can register for that on our September Free Webinars page. This week's edition of The Weekly Call is posted and the model portfolio there is up 206% in the ten months to September 10th, now slightly over our target minimum 200% return over the first year. As that target has been reached we're thinking of making the strategy there a bit less conservative. That's a free weekly service and if you trade futures I'd suggest adding it to your reading list.