- 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.
- I will be answering questions and responding to comments, so feel free to respond to any posts and I will see your comment even if it is not on the most recent post.
- If you're interested in seeing any intraday charts I post, I do that on twitter, and my twitter handle is @shjackcharts.
- The charts in the posts are as large as I can practically make them. if you would like to look at one more closely, click on it, and the link will take you to a larger version at screencast. If you click on that again, you will get a full page version, and can use the resizing function on your browser to enlarge parts of interest further.

Tuesday, 31 December 2013

Out with the Old

Nothing much changed yesterday and I'm still expecting at least a test of the current highs before the retracement that I am expecting to start soon. The consolidation over the last two trading days has formed a clear bull flag, so a new high could well run into the mid-1850s. SPX 60min:
The SPX daily upper bollinger band closed yesterday at 1849 and if SPX has a strong day could well close today in the 1855 area. I have decent trendline resistance in the same area so I'll be watching that with interest as a possible short term high area. SPX daily chart:
Everyone have  a great New Year's Eve and Day. :-) I'll be doing a post tomorrow or at the weekend laying out what I see as the highest probability path for SPX from here into 2016.

Monday, 30 December 2013

After the Feasts

Just a quick post this morning, as I still have guests requiring attention and I'm unlikely to do much actual work today.

SPX had a weak day on Friday but still closed the day within 2 handles and change of the daily upper bollinger band, so it was nonetheless another day riding the band up. I am expecting a retracement soon to establish the main support trendline for the move to my 1965 target, but there's no strong evidence yet that retracement is starting. SPX daily chart:
On the SPX 60min chart there is no current negative RSI divergence, and to establish any we would need at least a test of the current highs, which might then run quite a bit further. What I'm also looking for is a small double-top or H&S to form at the highs, and I'm not seeing that yet either. Overall I'm leaning towards seeing at least a test of the highs regardless of whether SPX is topping out short term. SPX 60min chart:
On Friday morning I was looking at the ES 50 hour MA as the key support level to watch and ES is now testing that at 1835.5. A test break below before a high isn't unusual however, so if we see a break below then it needs to hold as resistance before there can be any confidence that the short term high is in. ES 60min chart:
On balance I'm expecting to see a test of the current SPX highs at least and some sort of topping pattern form before we see the retracement that I'm expecting to see start in the near future. As soon as I can identify that topping pattern I'll post it on twitter if I can. I'm planning to take my children to see the new Hobbit film later so I'll be a long way from my desk for much of the trading day.

Friday, 27 December 2013

When the Wind Blows

This move up from the Fed spike up has been an inexorable grind. Due to the way it started there are no really decent trendlines in play here from the last low, and so no real patterns either. In effect we just need this wave up to blow itself out, and the next high and low should start to give some shape to the current overall move. On ES I have a three touch support trendline that may or may not be of much use, but the best signal that the current uptrend has ended will most likely come from a break below the 50 hour MA, currently in the 1829 area. ES 60min chart:
Main resistance overhead is at the weekly upper bollinger band, and that's at 1862, but I'd be surprised to see that hit on the current move,particularly as that should close next week in the 1875-80 area. SPX weekly chart:
I do have one decent resistance trendline overhead that may hold, and that is broken rising megaphone support from earlier this year. That has held since the last break below it in August and is currently in the 1850 area. On this daily chart SPX has been riding the daily upper bollinger band up and punched above it slightly at the close yesterday. This suggests that we may see an interim high within a day or two. SPX daily chart:
Last chart for today is WTIC, where oil is now breaking above the IHS neckline. The IHS target is in the 106 to 106.5 area and as I have mentioned before, there is significant resistance in the 101 area at multi-year triangle resistance. WTIC daily chart:
Sometime in the next few days this wave up should blow out and we will see a decent retracement. Apart from some overhead resistance in the 1850 SPX area however there are no decent trendlines or pattern setups here, and unless we see a decent topping pattern form it's hard to see much appeal in trying to catch this next high. When we see that retracement I'd expect a decent retracement pattern to form and at the bottom of that retracement will be a very attractive buying opportunity into my main Spring high target in the 1965 area. Until that retracement begins however there's not much to see.

Tuesday, 24 December 2013

Joseph and the Innkeeper

SPX followed the daily upper bollinger band upwards yesterday, and using my usual practice of counting any close within two points as a close on the band, closed on the band. The band isn't rising at full speed yet as the 20 DMA is still turning up, but I'm expecting the upper band to close today in the 1830-2 range, and most likely the SPX close today will be within two points of that. SPX daily chart:
On the SPX 60min chart there is now clear negative divergence on the 60min RSI 14, and I am expecting to see some retracement soon, very possibly starting on Thursday or Friday as there is often some retracement between Xmas and New Year. The obvious target for that retracement would be the daily middle bollinger band, currently in the 1798 area but rising of course. SPX 60min chart:
I've been watching the TNX chart carefully after the rising wedge there briefly broke down on the Fed announcement last week. The rising wedge has been holding since the recovery just afterwards but there is obviously a possible scenario for a serious meltdown on bond yields here that needs to be borne in mind. TNX 60min chart:
Oil is still testing the neckline on the IHS in what looks like a bull flag forming. I'm expecting this to break up, though I have some resistance in the 101 area that might prevent it making the pattern target in the 106 area. CL daily chart:
I'll be missing most of today watching the Crib Service at Chester Cathedral. My sons are playing Joseph and the Innkeeper and had to be separated at the dress rehearsal when they started fighting. I suggested that this was adding an interesting new twist to the Christmas story, but my wife disagreed and has been threatening to cancel all Xmas presents if there is a repeat performance of that today. We shall see. Everyone have a great holiday and my next post will most likely be on Friday morning as Boxing Day is a holiday here.

Monday, 23 December 2013

Smoke Signals

I was asked a very good question on Friday, namely why I had looked so carefully in the morning at a bear setup that was likely to be demolished at the open. There are two main reasons for that and they are first that my role is to look at the market and interpret what I see in terms of patterns and setups. It's not for me to ignore anything I see that doesn't fit what I am expecting to see, and I did qualify the bear setups with the comments that my overall lean was strongly bullish, seasonality and the GDP figures were bullish, and that the setup might well just break up into new highs, as it then did. The second reason is that seeing these patterns form and be steamrollered by bulls is of itself a strong signal that we are back in a strong wave up, and after these patterns broke up into new highs on Friday any remaining doubts in my mind about that were put to rest.

Anyone who has been reading my work for a while knows exactly where I think SPX is headed, and that is to the rising wedge target in the 1965 area that I looked at in detail on 30th June when SPX was at 1606. You can see that post here. That wasn't the first time I have posted this target, but it was the post where I considered the merits of that target in detail and in the historical context.

On the SPX 60min chart there's nothing to suggest that a reversal back down is imminent and I have a possible rising channel in play that would target a hit of channel resistance in the 1840s. That would be a decent fit with main resistance overhead at the weekly upper bollinger band, currently at 1847. SPX 60min chart:
On the daily chart the daily upper bollinger band was hit on Friday and until the next retracement the upper band should act as a kind of daily anchor for SPX to trade around, with a likely test from above or below at least once a day. In a strong uptrend the daily upper band can rise at 5 to 7 points per day, and that would put that in the 1828-30 area if we have a strong day today (as seems likely). The daily upper band isn't strong resistance and SPX punches through it regularly to trade above it for one to three days (or so). SPX daily chart:
Unlike the daily upper band punches above the weekly upper bollinger band are rare and this acts as strong resistance. That closed on Friday at 1847 and could go as high at 1855-60 by the end of December. SPX weekly chart:
The stats are bullish for today, somewhat qualified by ES already being up ten points from the close on Friday. There may not be much further upside available today, participation will most likely be low, and the bulls should be wary of a possible gap fill.

Over the Xmas period I'll be aiming to do at least a short post every trading day, but will most likely take much of the rest of the time off. I'm not expecting to do much trading this week, but should be able to get a post up tomorrow and on Friday morning.

Friday, 20 December 2013

Possible Double-Tops Forming

I was going to post the chart below on twitter last night but became dispirited and went to bed after my main computer crashed for the eighth time. I was showing the possible double-top setup on SPX that was forming yesterday as SPX was repeatedly failing to make a new high. This setup might break down today to retest broken double-bottom resistance at 1792.22. My overall lean for the rest of December is bullish but this needs to be borne in mind today. SPX 15min chart:
When I was looking at the charts this morning I saw that there was now also a perfect possible double-top setup on the ES 60min chart, supported by negative RSI divergence. At the very minimum this is good reason to be cautious on the long side today, but on a break below 1795 the target would be 1783.25, very close to a 50% retrace of Wednesday's Fed Taper Spike. ES 60min chart:
It wouldn't be unusual top see a retest of the SPX daily middle bollinger band at this stage, and that closed at 1796.5 SPX yesterday. An intraday spike down through it could easily deliver the obvious targets on the SPX and ES charts above, as those are in the 1789.5 to 1792.5 SPX area. SPX daily chart:
I'm still leaning bullish on bond yields, but I was laying out a possibly very bearish scenario there yesterday. I have this on possible reversal watch and will be posting this chart every day or two until TNX breaks up or down from this inflection point. TNX 60min chart:
When CL first reached 97 on this rally I sketched out the possible IHS that might form at a 97 neckline and that IHS is now fully formed and has been testing the neckline. On a daily close above the neckline I have the IHS target in the 106 area. CL daily chart:
On the bigger picture however there is some significant resistance at the three year triangle resistance in the 101 area and that might hold. If oil should break back above that however I have sketched in a currently extremely speculative falling channel that might be forming. WTIC daily chart
Bulls should be concerned about any move below 1800 ES this morning, and on a break below 1795 we might well see those double-tops play out today. If that happens the close will be interesting as a close on or above the SPX middle bollinger band would lean bullish, and a close more than 2 points below would remind us that despite the bullish action this week SPX is still in a cycle of lower highs and lows that it has so far failed to break. That will no longer be a concern if SPX can push up over 1811.52 near the open today.

This is a simply beautiful short term bear setup but ........ the GDP number was decent, seasonality is bullish, participation today is likely to be low, and it's been a while since the bears have reliably been able to find their car keys. We may just break straight up to new highs instead. At the least though there is good reason to be careful with longs today.

Thursday, 19 December 2013

The Santa Rally Begins

I was saying yesterday morning that coming into Fed day just under clear pattern resistance augured badly for bears, and so it turned out. After a test break above SPX falling channel resistance SPX pulled back, made a new RTH low immediately after the Fed announced tapering to start in January, and then broke up for a massive short covering rally as people realized at last that cutting bond purchases from $85bn to $75bn per month wasn't really much of a change after all. The move from the post Fed low into the high just before the close was an impressive 45 handles as a lot of traders were forced to eat their shorts.

My EW analyst friends Pug and Alphahorn both nailed this move very well, as ever, and Alphahorn's model portfolio moved back into longs near the low last week as Alphahorn tries to beat his 2011 model portfolio return of 75%, though we'll need a strong move into the end of the year to put him over the top for that as I think he's only at 65% or so at the moment. I have been a member at both of their sites for years now, and they are both outstanding chartists and analysts with a lot of happy members. If you are trading in any kind of size then memberships at their sites is a relatively modest and very worthwhile investment in my view.

Alphahorn suggested an intriguing possibility in a note to his members half an hour before the Fed announcement yesterday and that was that the retracement pattern on SPX might be a falling wedge. The post Fed low almost made it to wedge support and then it broke up to make target shortly afterwords. Was this a channel or wedge? Both I think, as you sometimes see setups that are both. It made a better channel overall I think but that was some really slick classical chartwork from Alphahorn that brightened my day. SPX 15min chart:
RUT broke up hard with everything else but there was one exception at the end of the day on TRAN. I had prepared the TRAN chart in the morning while working my way through the US indices but didn't use the chart in my post because channel resistance was so far above resistance on other indices. I was surprised then to see at the end of the day that the high yesterday was a perfect test of the falling channel resistance trendline that I drew in the morning. What does this mean for the bullish breaks yesterday? Not a lot really , but obviously TRAN will also need to break up from this channel to end the current downtrend there. TRAN 15min chart:
SPX obviously broke hard over the daily middle bollinger band yesterday, and isn't that far away from a test of the upper band, which closed yesterday at 1817.81. As and when that is tested, which could be today, I'd expect any uptrend to stay fairly close to the upper band. The middle band (also the 20 DMA) will need a couple of days to turn up, but after that this can rise at 5-7 points per day in a strong uptrend. SPX daily chart:
How much room for further upside is there here? The main resistance is the SPX weekly upper bollinger band, and I was saying a few weeks ago that could only rise at 10-15 points per week in a strong uptrend, with punches above being rare, so decent retracements would be needed to open up space above for impulse waves up. The retracement just ended has the weekly upper BB now at 1846, and that could be in the 1850-60 area buy the end of December, and as high as 1890-1920 by the end of January. My rising wedge target that I posted in June is in the 1965 area, so it is coming into range over the next few months. SPX weekly chart:
So what about bonds? Bernanke repeated the usual nonsense about QE keeping long term yields low, when the reality is that all big spikes in yields in the last few years have been during QE periods, but for the short term at least the Fed announcement has broken the current rising wedge on the TNX (10yr treasury Yields) chart. There is a possible small double-top forming there and also a possible large double-top if TNX can get back to the valley low at 24.71. This is worth bearing in mind as very strong rallies on bonds (and declines in yields) start near or at the end of QE periods, and this is a warning that might be starting now, even though this taper is very modest and the Fed so doveish and hesitant here that QE doesn't seem likely to be meaningfully reduced for quite a while yet. TNX 60min chart:
On the bigger TNX picture I have TNX breaking up from a ten year falling wedge on the weekly chart, and I'm consequently rather doubtful about the larger double-top playing out, but it's worth keeping an eye on. The green shaded areas on the chart below are QE periods, so you can see at a glance the real effect that QE has had on bond yields in the past. TNX weekly chart:
Overall the Santa Rally is on, and I'm not expecting to see another big retracement for January at the earliest. I'd recommend buying the dip over the rest of December.

I mentioned yesterday that I am having some problems with my main trading computer and I have a question for any techie readers today. I'm reloading my OS etc onto a new hard drive later which should buy me some time, and will fix the problem if the issue is software or my hard drive, but if not then the problem could of course be with the CPU, RAM, motherboard, graphics cards etc. Does anyone know of any good testing/diagnostic software to test these components and identify any problems there? I built the computer myself a while ago out of top quality components so if I can trace the problem I can swap out any faulty components easily enough.

Wednesday, 18 December 2013

The Fed Big Guns

Politics is the art of looking for trouble, 
finding it everywhere, diagnosing it incorrectly 
and applying the wrong remedies. 
Just a short post today as I am having fairly serious computer troubles since yesterday afternoon. I suspect my hard drive is failing, so I have a new one arriving tomorrow which I can install at the weekend. In the meantime I'm expecting my main trading computer to crash several times a day which is time-consuming.

The Fed may well dominate the rest of the week, with a Fed Press Conference at 2.30 today and $10bn in POMO on Thursday and Friday. As ever it seems when the Fed is rolling out the big guns, SPX is poised just below resistance and it may well be that we will see a strong Santa Rally start today on a break over that resistance. The weekly upper bollinger band is now at 1841 and if we see a strong move up from here that may well be the target, most likely to be hit at a higher level than it is now.

Our blind and bumbling central planners apart, how does the technical setup look here? Well on SPX falling channel resistance was hit two more times yesterday, and the multiple hits in the last two trading days are the sort of action where I would normally be looking for a break up in the near future. If we see that break up today then the obvious next target would be a test of the highs and most likely beyond into January. SPX 15min chart:
To confirm any break above the falling channel on SPX I would then be looking for SPX to close back over the daily middle bollinger band, which closed yesterday at 1793. That would therefore require a conviction break above the opening high on Monday. That would open up the daily upper, which closed yesterday at 1815.70. If we see any weakness today I have lower band at 1772 at the current SPX retracement lows. SPX daily chart:
My perfect falling wedge on RUT from yesterday morning didn't survive the day but the rough declining channel I posted on Monday morning did. a break up with confidence would also look bullish but looking at the RUT chart from June I'm wondering about seeing a retest of the lows to hit the rising wedge support trendline from the June low, which looks like unfinished business here. RUT 60min chart:
I've also put the H&S forming on NDX into the larger context since June, and there is similar unfinished business there at rising channel support from November. If this H&S survives the Fed this week and breaks down, the obvious target would be at rising megaphone support from June. I would note on this chart that an H&S very similar to the current one was forming in Oct/Nov before breaking up during the formation of the right shoulder. NDX 60min chart:
A lot of traders will be sitting the day out today as there may well be some extreme volatility. I'll be choosing my own trades carefully and would suggest that anyone trading today do the same. If we see strong resistance breaks today that may well kill off the current downtrend and start a strong Santa Rally and if so, those breaks should be respected.

The nine most terrifying words in the English language are: 
'I'm from the government and I'm here to help.' 
- Ronald Reagan

Tuesday, 17 December 2013

Hold or Fold?

I often talk about the need, fairly early in any trend, to establish either a significant rising support trendline (in an uptrend) or a significant declining resistance trendline (in a downtrend). That is a key reason that I was looking for a strong rally here and I think those key trendlines have now been established on both SPX and RUT. The question now is whether those trendlines will hold or fold. If the downtrend is to continue then the RTH yesterday was the rally high and both SPX and RUT should turn down from there. If the downtrend is to break and open up a retest of the highs and a Santa Rally, then I'd expect those trendlines to break up today or tomorrow.

On the SPX 15min chart there is now a perfect falling channel from the last highs with three trendline hits above and below. This setup was strongly confirmed with two hits yesterday and this trendline is the key resistance here on SPX in my view. SPX 15min chart:
I've been treating the setup on RUT as a rough falling channel, but I think this is most likely instead a perfect but gently narrowing falling wedge. If so then the rally high there was also hit yesterday and a break up from this wedge would also be a strongly bullish signal. RUT 60min chart:
I gave the ideal right shoulder high area on NDX yesterday morning as the 3500 area and the opening high was 3494.41. For symmetry I'd normally expect another day or so of consolidation, but that's high enough for the right shoulder. A conviction break above 3500 would be a bullish signal here. NDX 60min chart:
The other important resistance here, though less important as it is currently higher than trendline resistance, is the daily middle bollinger band on SPX. A close back above this would be bullish confirmation of the bullish break of the falling channel on the chart at the top that would already have taken place. The upper band would be the next target and that's currently at 1815. SPX daily chart:
Not much of importance has been happening on bonds and precious metals recently, as we are close on both to very significant longer term levels, but haven't hit them yet. On bonds the 30 year bond yield (TYX) is nearing channel resistance on my declining channel from 1985 and a break above would be a strong signal that the bull market on bonds since 1980 has at last finished. Equally a strong reversal there would signal the opposite. TYX monthly chart:
On precious metals (PMs) my primary scenario is that both gold and silver make marginal new lows before most likely breaking back up for what might well then be a new bull market in precious metals. I have key levels to watch on all my PMs charts, but the first one to break up would most likely be the falling channel on GDX., with resistance there currently in the 23.5 area. As and when this does break up this should be a VERY strong buy signal. GDX weekly chart:
The top two charts are the key ones today. I'm leaning short here unless and until we see those resistance trendlines break, but if they do break up then we could be looking at a powerful move up over the next few weeks that would be boosted by the failure of the technically decent double-top on SPX. When these patterns fail there tends to be a strong reaction in the opposite direction.

Monday, 16 December 2013

Here's the Bounce

SPX closed on the daily lower bollinger band for a third straight day on Friday. If we should see the same today then I'd be looking at a closing range in the 1769-72 area. However looking at the overnight action, the bounce that I was looking for late last week may well now be in progress, and resistance is therefore at the middle bollinger band in the 1795 SPX area. SPX daily chart:
The overnight action has been wild, with a spike down to 1754 (March ES) on the disappointing China PMI numbers, and then a wild 25 handle rally up to 1779.50 so far. I have ES testing declining resistance from the high there, and if that is broken then main resistance is the daily middle bollinger band in the 1786 area. ES 60min chart:
I'm currently working on the assumption that this is a rally within a downtrend, and apart from watching to see whether resistance at the daily middle bollinger band on ES and SPX holds, I'm also watching RUT and NDX which have clear targets that should not be exceeded if this is just a rally. On RUT I'm looking for a test and reversal at declining channel resistance in the 1122-4 area. A break over the channel would obviously be a strongly bullish signal. RUT 60min chart:
On NDX I mentioned the possible H&S forming there on twitter on Friday afternoon and if that continues to form, the ideal right shoulder high would be in the 3500 area. On a conviction break above 3500 this scenario becomes less likely. NDX 60min chart:
One last thing to mention on equities today was that the closing pattern on Friday on the SPX 15min chart was very clearly a well formed descending triangle. These break down 64% of the time and if ES should manage to retrace back below 1774 by the open then that this is a 64% bearish pattern should still be borne in mind despite the strong rally overnight. The target on a break down would be the 1762.5 SPX area, and the target on a break up would be the 1789.50 area. I'm expecting this to break up today but if the open is weaker than expected then this might still go the other way. SPX 15min chart:
On other markets the IHS right shoulder that I suggested a few days ago might form on CL has reached the ideal right shoulder low and reversed there. If this pattern should now break up I would have a target in the 106.5 area. CL daily chart:
Could this be the start of a Santa Rally? Yes, but there has been very significant technical damage done last week and I would be assuming that this is a counter-trend rally until demonstrated otherwise. The bulls need to break over the daily middle bollinger band on SPX and also break the declining channel on RUT to open this up as a scenario.

Friday, 13 December 2013

Another Inflection Point

The main ES contract has moved from December to March today and ES (March) is trading 6.25 handles below SPX, which needs to be borne in mind when looking at ES prices. 

Yesterday's close was a cliffhanger, with strong short term bull and bear scenarios that I posted on twitter and was thinking might well be resolved at the open. The bull scenario that I posted yesterday night on twitter was the declining channel on RUT, with the obvious next move being a bounce towards channel resistance, at which point RUT would either break up or turn back down. RUT 60min chart:
The equivalent of this bull setup on the SPX 5min chart is the falling wedge that I posted on twitter yesterday before and after it broke up, and the possible IHS forming after the initial rally from the wedge break. The close yesterday was close to the ideal right shoulder low on that IHS and an open over 1782 would be a gap up over resistance targeting the 1791 area. SPX 5min chart:
If we do see that IHS rally on SPX today the obvious upside target is the daily middle bollinger band, which closed at 1795 yesterday. SPX closed at the lower bollinger band for the second day yesterday and if SPX continues downwards I have an ideal closing range in the 1766-70 area today. SPX daily chart:
The bear scenario that I posted last night on twitter is of course the double-top on SPX that broke below the trigger level yesterday morning and is targeting the mid-1740s and the possible large H&S neckline there. These patterns, when they fail, tend to fail just under the break and yesterday's low would be in that area. A move into the 1760s today would firm up this target. I have seen this viewed as an H&S around the blogosphere but the right shoulder and head highs are too close, so it is better viewed as a double-top. SPX 60min chart:
If this inflection point does resolve downwards then on the way to the 1740s target there is a very significant double support level in the 1760 SPX area, and that is where the 50 DMA meets broken rising wedge resistance from the 1560 low. This is an important technical support level that the bears need to break to firm up the overall bear scenario and I'll be watching it carefully if it is reached. SPX daily chart from October 2011:
I would note that on the 5min chart ES has made a higher low and high overnight so until the overnight low at 1667 is taken out ES is in a short term technical uptrend. If that low is taken out we will most likely resolve down today with the next big support level in the 1760 SPX area in possible range today but more likely to be tested on Monday. The level to take out on the upside is at 1777.75 ES, which was the high yesterday, and if that's exceeded then I'll be looking for that test of the daily middle bollinger band on SPX and ES. No time for other markets today. I'll be posting some charts for these on twitter after the open. 

Thursday, 12 December 2013

Who Knew? - The Bear Scenario

Well I've been saying all week that I would start to take the larger bear scenario here seriously on a break below the weekly pivot at 1796, and here we are. Who knew that the bears had it in them to deliver a full day of relentless selling? It's been a while since we have seen that.

In the short term the decline on SPX yesterday was within a tight declining channel that was intact at the close. We may see that break up at the open and if so I'll be looking for a short term low to form for a bounce. Until this channel breaks up however, we are in an established and very steep downtrend. SPX 5min chart:
As the bears showed some real strength yesterday I'll run through the overall bear setup here, and the highest probability path for a strong retracement from the recent highs if we are to see that. On the 60min chart below I have marked up the current double-top that has not not yet broken down but may do so today with a target back in the mid-1740s. If we see that then the obvious target is the possible H&S neckline there, and if we were then to see a right shoulder form to complete that pattern there would then be an H&S targeting the 1680 area. The obvious downside targets for a large retracement would be the SPX 200 DMA, currently at 1662, and the weekly lower bollinger band, currently at 1616. SPX 60min chart:
If we are to see that large retracement over the next few weeks and months, that would be in the context of a large rising channel from the October 2011 low that was established at the 1813 high. The channel target would be at rising channel support, currently a little under 1600 and not far from the weekly lower bollinger band. Important support levels to note on the way would be broken rising wedge resistance in the 1760 area and rising support from the 1560 area, currently in the 1690 area and a decent fit with my theoretical H&S target and the 200 DMA. SPX daily chart:
On ES the overnight action currently looks like a bear flag forming at the hit of the daily lower bollinger band, and there is currently no positive 60min RSI divergence. There's nothing immediately obvious to suggest an imminent bounce though that possible bear flag might turn out to be a double-bottom. If we do see a bounce today the obvious target is the 1792-5 area to retest the daily middle bollinger band and the 50 hour MA. ES 60min chart:
The rising megaphone on RUT that I posted yesterday morning turned out to be the key pattern of the day as equities melted down after that megaphone broke at the open. I don't have a pattern for the decline yet but the positive divergence on the 60min RSI is suggesting that a bounce may be close. if we see that the obvious target would be declining resistance in the 1127 area. RUT 60min chart:
I'm looking for a bounce soon that would retest the middle bollinger band on ES and SPX in the mid-1790s. We may not necessarily see that but of the seven hits of the daily lower bollinger band from the upper bollinger band in the last twelve months, all seven made a low within a day and then retested the middle band. Of those seven, five then returned to the upper bollinger band. That doesn't mean we'll definitely see a retest of the middle band here, but it would seem more likely than not that we will.