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Friday, 18 October 2013

Close to Strong Resistance

This has been a really very strong move up from the last low at 1646 SPX. This parabolic rise must end shortly however as SPX is now closed to the weekly upper bollinger band, though it was still ten points short of that at the close yesterday. I have a string of resistance levels of various kinds centered around the 1738/9 ES (approx 1744-6 SPX) area today and I'll go through those.

On the weekly chart the weekly upper bollinger band was at 1743 at the close yesterday. If SPX has a strong day then it may close as high as 1646, but closes over the weekly upper BB are rare and I'm not expecting to see one today. SPX weekly chart:
On the SPX daily chart SPX closed three points above the daily upper BB yesterday. The daily upper BB shouldn't rise more than seven points today, and SPX shouldn't close more than ten points above that, so I have a maximum close level on SPX today at 1747, close to weekly upper BB resistance. SPX daily chart:
A week ago I mentioned the possibility that the move down into the 1646 low had been a bullish underthrow of the rising wedge from the 1560 low. I have had a very close look at that pattern this morning and I have rising wedge resistance in the 1742-4 area today. If we see that level tested and broken in the next few days I would have the wedge target in the 1925 area, to go with the 1965 target from the rising wedge from the 2011 low that broke up earlier this year. It is hard to overstate the importance of this area in determining direction over the next few months, but for today at least I'm expecting that resistance to hold. SPX 60min chart:
On the ES 60min chart we can see the fourth level of resistance in the 1738/9 ES area  today, and that is the weekly R2 pivot at 1738.6. As with the SPX weekly upper BB, a weekly close above is rare. Also worth mentioning that the ES 60min RSI is spilling down from negative RSI divergence, as with the last move down that finished with the low shortly after the open yesterday morning. ES 60min chart:
I have a likely range between 1717 and 1738/9 ES today. Resistance in the 1738/9 area is very strong and should hold today, though this confluence of resistance levels is just for today, and all of these resistance levels will be rising at different rates next week. As soon as we hit the weekly upper BB we should return to a more two way market, as the weekly upper BB can only rise about ten points per week and weekly closes above it are very rare. Support at the ES 50 hour MA is now at 1720.

I won't be around much today as I am not feeling well. Getting a post out this morning has been a triumph of willpower, but I felt I needed to do a post defining the resistance levels that are now close above.

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