- 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
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Wednesday, 24 May 2017

Unfinished Business

Yesterday was one of the lowest volume days of the year, and today was not an exciting day. This isn't unusual just before a holiday weekend, though it's rare to see much slowdown before Thursday. Yesterday I mentioned two levels that were unfinished business that might well need to be completed on NQ and TF. The unfinished business on TF was the test of the IHS target and monthly pivot at 1386, and that was hit this morning. The unfinished business on NQ was at the full retest of noon the all time high at 2427, and that was hit at the high this afternoon. I now have no open pattern targets above, apart from a weak possible alternate IHS target on NQ at 2746.

The obvious next move here is a reversal back down. The setup is all there and if this was a bullish setup I'd be taking out a second mortgage on the farm to add to my longs. As a bearish setup I like it a lot, but is obviously reliant on the bears showing us something to show they are still with us in more than spirit.

The important trend support levels on SPX below are at the daily middle band at 2390, the 5dma and 2389, and the 50 hour MA at 2387. Bears need to break that band of support and convert it to resistance to demonstrate that they are still in the game here. If they can manage a sustained break below then the next obvious targets would be possible double top support at 2322 and then rising wedge support in the 2280 area.

SPX daily chart:
An RSI 5 sell signal has fixed on the hourly chart. SPX 60min chart:
The ES and NQ futures charts below were done before the 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.

ES still likely topping out. The RSI triangle broke up and made target at 70 (on RSI), A possible 60min sell signal is still brewing and first strong support at the weekly pivot at 2390.5 is a strong match with the 2387-90 key support band on SPX. ES Jun 60min chart:
NQ has made the IHS target and has no further unfinished business above. A 60min sell signal fixed yesterday and I'm looking for reversal back down. NQ Jun 60min chart:
TF made the unfinished business at the IHS target and monthly pivot test at 1386.7 and rejected there to break down through wedge support. This high should be in, barring a possible retest of today's high as part of a topping process. TF Jun 60min chart:
I'm concerned about the low volume and approaching holiday for this setup, particularly as bears have a history of performance issues and failing to get it down, so to speak, when the moment of truth arrives. We'll see how they manage here. It is a nice setup, and the reservations I had yesterday about obvious unfinished business above have been sorted out at the NQ and TF highs today

Stan and I are doing a free public webinar at theartofchart.net an hour after the close tomorrow on Trader Psychology in the second of our Managing Risk webinars, and if you'd like to attend then you can register for that on our May Free Webinars page. The video for last week's Big Five webinar is also posted there. I would also note that this week's edition of The Weekly Call is posted and that the model portfolio there is up 178% over the last six months, looking well on course to make our target minimum 200% return over the first year. As and when that target is 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.

Tuesday, 23 May 2017

Back On The Three Day Rule

SPX resolved higher yesterday and the cycle trend day delivered a unidirectional day dominated by the bulls, though not making any new speed records of course. Today is the other cycle trend day this week but as yesterday's cycle trend day delivered, that less likely to deliver today, and the day has been a two way trade so far.

SPX delivered strong closing breaks above the important resistance levels yesterday and at the time of writing they are the 5dma at 2379-80, the 50 hour MA at 2387/8, and the daily middle band at 2390.

The break over the daily middle band requires confirmation with a close above it again today, and as the decline into 2352 was a shade over 2.1%, the break back over the 5dma puts SPX back on the three day rule, which is that on a break back (more than two handles) below the 5dma today or tomorrow looks for a retest of the last low at 2352 before a retest of the last high at 2405. If we were to see that high retest before the break back below the 5dma that would be strange however, and out of the dozens of these breaks over the last ten years I can't recall that happening before. If we see that break after an ATH retest on SPX that might raise a question mark over the break, though SPX would likely make that target in any case. SPX daily 5dma chart:
The ES and NQ futures charts below were done before the 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.

ES made the low at rising wedge support this morning and rallied back to wedge resistance this afternoon. Wedge support is currently in the 2393.75 area and that is the obvious next short term target. On the bigger picture these wedges break down 70% of the time and the 60min sell signal that is brewing is suggesting strongly that this one will break down too. ES Jun 60min chart:
The higher quality rising wedge is on NQ, and rising wedge support was broken at the low this morning. The possible 60min sell signal on NQ also fixed this morning so NQ is likely in a topping process. That could involve a retest of the high but it seems more likely that NQ is forming an H&S right shoulder here that would have an ideal high in the 5706 area. If NQ rallies back to that area, another leg down may well start there. I'd note that I have an IHS target on NQ at a full retest of the all time high and that target has not yet been reached. That target may still need to be reached. NQ Jun 60min chart:
I also have an IHS target not yet reached on TF at 1385/6, though that target area is most compelling on a test today. Like ES a 60min sell signal is brewing but not yet fixed, and like NQ the rising channel broke down at the low this morning. TF Jun 60min chart:
I called a possible swing high at the 2399.50 ES high this afternoon. That's not an ideal setup but very possible. We'll see whether indices can manage higher. Possible unfinished business above at the ATh retest on NQ and 1385/6 on TF.

Stan and I are doing a free public webinar at theartofchart.net an hour after the close on Thursday on Trader Psychology in the second of our Managing Risk webinars, and if you'd like to attend then you can register for that on our May Free Webinars page. The video for last week's Big Five webinar is also posted there. I would also note that this week's edition of The Weekly Call is posted and that the model portfolio there is up 178% over the last six months, looking well on course to make our target minimum 200% return over the first year. As and when that target is 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.

An old trading friend died yesterday and I want to take a moment to remember a good man and very talented analyst, William Blount at Mr Topstep. He was kind and generous enough with his time to teach myself and others a lot about trading ES in the couple of years we spent trading together. He gave just as impressive an example in his death as he did in his life, living more than his due three score and ten years, producing excellent work up until his last day, and then dying suddenly with no extended illness or pain. I hope to be fortunate enough to follow suit on all three counts in due course. Bill will be missed by his many friends and colleagues over the years and I am confident that his funeral will be a great deal better attended than mine is likely to be, unless I start to get out a lot more often. The world is a poorer place for his absence, which is something we should all aspire to as a hard earned and worthwhile epitaph. A life well and fully lived. I will be raising a glass with (unusually) something alcoholic in it to him in remembrance soon. Godspeed to you Bill.