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Friday 30 May 2014

Band Ride - Day Five

Yesterday completed day four of the daily upper band ride by my count and I have had a look at these over the last five years to look at the amount of time these lasted. None were longer than ten days, and by definition they had to last at least three days, so the distribution was as follows:

  • 3 Days - 3x
  • 4 Days - 5x
  • 5 Days - 6x
  • 6 Days - 4x
  • 7 Days - 3x
  • 8 Days - 2x
  • 9 Days - 2x
  • 10 Days - 1x

The most common and median length was therefore five days and that included the band rides immediately preceding all three of the spring highs in 2010 through 2012, one of which topped on the last day of the ride, and the other two of which came within ten points of the spring high, which was made on a retest shortly afterwards.

On the daily chart he obvious target is still rising wedge resistance in the 1930 area. That would be likely to be hit today or on Monday, which is the statistically leaning bullish first day of June. SPX daily chart:
Negative divergence is building on the 60min RSI, which is suggesting that after the 1930 area resistance trendline is hit, there will be a decent retracement from there. There is the possibility that the wedge will overthrow a bit, but if that happens today I'd still be expecting a close at 1930 or under. SPX 60min chart:
On the weekly chart the weekly upper band closed yesterday at 1922, and may close as high as 1925 today. Any close under 1930 shouldn't be a strong punch over the weekly upper band. That's important as such a punch would strongly suggest a 50+ points retracement in the near future, though as the spring high is most likely close a punch over this here would be both less difficult and significant than usual. More important is primary rising channel resistance in the 1940 area, which should be rock solid resistance here. SPX weekly chart:
NDX is retesting the current all time high here and this is a possible fail area, though the rising wedge target is still some way above. NDX 60min chart:
RUT is looking very weak here still, and has failed so far to even retest the level of the opening spike on Tuesday. Unless this changes soon the double bottom on RUT is likely to fail at the break up, which is, as I have mentioned before regularly, where these patterns generally fail when they do. RUT 60min chart:
Now that the falling megaphone on TLT has broken up I have retired my early January projection, which turned out to be spookily accurate, and done a new projection over the next year showing what I am expecting from here. Obviously this is just an educated guess but for whatever reason over the last four years my big picture bonds calls have been very accurate, and this scenario hangs together very well with my long term bonds charts. TLT daily chart:
AAPL is approaching the 640 area target trendline I showed as my target on 15th May, and is starting to look like an interesting short. That's not just due to the channel, as if you look at the daily RSI 14 over the last two years you can see that reaching the 80 level has been a decent stand-alone short signal over that period, and I would note that rising channel support is currently in the 525 area. AAPL daily chart:
The chances are that the current daily upper band ride will end today or Monday, and further the odds are very decent that the high made at the end of this band ride will be within 20 points of the spring high that I am looking for soon. I'm expecting a hit of 1930 SPX today or Monday and will be looking for short entries there.

Thursday 29 May 2014

Daily Band Rides

Yesterday was day three of the current ride on the daily upper band. These rides are where there is a strong trend in either direction using either the daily upper or lower band as the anchor for the daily candles. Yesterday was a decent example, closing within 0.20 points of the daily upper band. These band rides vary widely in length, it isn't uncommon to end after three or four days and they can extend to seven or eight. The last two band rides on this chart lasted nine and five days respectively. SPX daily chart:
The obvious next target on the SPX chart is rising wedge resistance in the 1930 area. If the daily upper band ride continues then that could be reached on Mon/Tues next week, or tomorrow on a very strong push. Key uptrend support is the breakaway gap from last Friday's close at 1900.53. That should not fill until SPX has finished the current move so if the gap should fill the current uptrend might well have topped out. I am concerned about the negative divergence on the 60min RSI. SPX 60min chart:
On the weekly chart the upper band is at 1920 now, and could close as high at 1925 by the end of this week. A break of five points or less wouldn't be a serious break so the 1930 rising wedge resistance trendline is in possible range tomorrow. Very strong primary rising channel resistance is in the 1940 area, and I'm not expecting to see that broken, though it is rising at about 15 points per month. SPX weekly chart:
There is also negative divergence on the 60min RSI on the NDX chart which I am watching. There is a possible uptrend fail area at the retest of the current all time highs, so I'm watching this area carefully. NDX 60min chart:
There is no negative divergence on RUT but it is still lagging other indices, despite the bargain basement P/E now all the way back down to the 75 area. RUT appears to be forming a bull flag here and needs to push, as when double bottoms fail, it tends to be just after they break up. RUT 60min chart:
Bonds had a strong day yesterday and on TNX we saw the break below double-top support that I have been looking for. If this break holds then the double-top target is at 19.06 which is the endpoint of the bear scenario I posted as my end of QE3 scenario on TNX on 7th January. TNX 60min chart:
On TLT we also saw the break that I have been looking for with a gap over falling megaphone resistance on my January projection. I haven't moved any arrows on this projection since January but I think I'm going to have to move my break up arrow across slightly next time I post this. If the break holds then the megaphone target is a retest of the 2012 high at 125.43. TLT daily chart
The SPX and NDX 60min RSIs are suggesting weakness here. A strong ongoing trend will steamroller those sell signals so if that is what we still have here then those should be easy to overcome. If not then SPX needs to stay over 1900.53 to preserve Tuesday morning's breakaway gap. If that gap can be filled the bears may get a shot.

Wednesday 28 May 2014

Breakaway Targets

A quick and early post today as I need to be away at a funeral all day.

Yesterday was the second day of the current ride up on the daily upper band, and SPX closed the day six points above the band. That most likely limits upside today somewhat but 1920 would still be in range. I'm not expecting this band ride to end yet but if it does then middle band support is in the 1885 area. SPX daily chart:
SPX gapped above the megaphone upper trendline that was resistance on Thursday and Friday, and the megaphone target is in the 1940 area. There is a slight issue with that, in that in order to reach that target within the current overall rising wedge, then that wouldn't be able to happen until the end of June, which seems rather too far away. The megaphone may fail to reach target but for the moment I am assuming that there will be a bearish overthrow and have marked up the chart accordingly. SPX 60min charts:
NDX broke up from a rising wedge with a target in the 3875 area at confident new highs. NDX 60min charts:
RUT broke up from a double bottom with a target in the 1190 area. That is close to the ideal right shoulder high for the possible larger scale H&S forming on RUT, which I gave in the 1182 area a few days ago. RUT 60min chart:
Yesterday was an impressive break up, and assuming that yesterday's opening gap on SPX doesn't fill, that was an breakaway gap on SPX backing up the higher upside targets on SPX, NDX and RUT. I have no reason to think that these targets won't be made. We may see some weakness today and I'm wondering whether we will see a retest of broken megaphone resistance in the 1903/4 area.

Tuesday 27 May 2014

Moment of Truth

Today we should get the answer to the question where SPX is breaking up towards the next upside targets, or will fail at the retest of the 1902 high. early indications favor the bulls so far and I'll be watching this rising megaphone that I posted on Thursday night to see whether it breaks up, very possibly at the open. If it does, and the gap doesn't fill, then that should be a bullish breakaway gap. SPX 15min chart:
If SPX does break up then I'll be looking for a hit of rising wedge resistance on the 60min chart. I have that in the 1935 area at the moment,. and rising of course. SPX 60min chart:
That resistance is backed up by the primary rising channel from the 2011 low with resistance in the 1940 area. In the short term the weekly upper band closed at 1911 last week and could close this week as high as 1921. That is generally strong weekly closing resistance. SPX weekly chart:
Until demonstrated otherwise the bulls have the edge today and I'm favoring a break up. The megaphone target would be with significant resistance levels in the 1940 area and I'd expect a move there as long as a break up today can be sustained.

Friday 23 May 2014

Push Up or Shut Up

I'm a reversals specialist, and on a multi-timeframe basis I chart trendline, pattern and RSI reversal setups that work well. I'm good at what I do. However on an intraday basis the first question of the day is always whether it might be a trend day. On a trend day all reversal setups become worthless, bearish patterns deliver tiny declines if they deliver at all, every counter-trend reversal setup, however good on other days, stops working, and there will generally be no setups in the direction of the trend because the retracements are too small to form them. That is the power of a strong trend.

On larger timescales these trends can last months or even years, and while in the grip of these strong impulse waves my smaller reversal setups and intraday reversal setups work just fine, as they are too small relative to the trend to be strongly affected. However I then get the same problem with my daily, 60min and 15min charts as I get with my intraday charts on trend days. Time after time very nice reversal setups will setup and the trend steamroller will squash them flat. A strong impulse wave up will roll straight over anything in its path until it ends, and must be respected.

So what's my point? Well we are now at a crossroads on SPX, and other indices as well of course. I called the highs yesterday on twitter with a very nice little rising wedge that broke down in the afternoon and you can see that wedge in thin lines on my SPX 15min  chart below. The chart covers the last month as SPX has chopped around in the current range and you can see nice clear patterns, and a string of RSI 14 divergences that formed and marked the start of significant reversals. If we are still trading that range, and are not in a new impulse wave upwards, then the short term high was made yesterday, or might be slightly exceeded today before a decline that should take SPX to rising megaphone support, currently in the 1872.5 area but obviously rising. You can see that I have marked in the last six 15min RSI divergences from overbought/sold and all six made the target at the 30 or 70 level on RSI respectively. If we are not in a new impulse trend up then I would expect this reversal to do the same.

If we are in a new impulse trend up then this powerful reversal setup will be bulldozed, and making a sustained new high will confirm the break up from the range. If we do see a break up then the alternate scenario I showed yesterday will become my primary scenario. We reached the point of decision yesterday afternoon, and now we will see what happens there. SPX 15min chart:
On the 60min chart the 50 hour MA is now at 1882, and bulls need to hold that while bears need to break down through it towards the test of broadening wedge support. I was asked why the 50 hour MA is important, and the answer is that an impulse move will generally break over the 50 hour MA and then hold it as support until near the end of that move. If we see a decent break back below it now then the chances that we are in a new impulse wave up drop dramatically, and in that case we would very possibly be in a new impulse wave down, in which case the 50 hour MA would be important resistance. SPX 60min chart:
On the daily chart SPX came close to testing the upper band yesterday, and that is now at 1899. Given the strong reversal setup at the high yesterday a hit of 1899 now might well be a break upwards. If we see that test I'd give even odds that would be the start of a band ride upwards. SPX daily chart:
I was being chided yesterday for ignoring the obvious break up on NDX, but as ever I'm seeing the setup here differently to most. On my NDX chart we are seeing what is either a bullish break upwards from a rising wedge that will most likely evolve into a rising channel if that break is sustained, or a bearish wedge overthrow that on a break back below broken wedge resistance would be looking for a test of the April low at 3414. That would complete the huge H&S that has been forming on NDX over the last few months, and might therefore just be the first half of a longer journey south. I'm watching this setup with great interest but it isn't a compelling long yet in my view. NDX 60min chart:
This is a very important inflection point and what happens here should set direction for weeks on a break up, or months on a break down. This could go either way though the bull case here is helped by the holiday weekend, as these low vol periods around them tend to favor the bulls in my experience.

Just as I finish today I'd like to give a shout out to another classical chartist called Bouraq. I had a good look at his blog yesterday and I was very impressed by his feel for good trendlines. This is a surprisingly rare skill and I have added him to my daily reading list, which really isn't a long list. For anyone else who enjoys quality trendline/channel chartwork his blog is at www.tradingchannels.co.uk, and you can find him on twitter at https://twitter.com/Tradingchannels.

Thursday 22 May 2014

Only Uncertainty is Certain

Bulls beat the stats and repaired a lot of damage yesterday, closing with a clear break above the 50 hour MA. If that turns into support then the path is clear fora retest of the highs. If SPX makes a new high with any confidence then the next upside target would be rising wedge resistance in the 1930-40 area. SPX 60min chart:
How would a 1930-40 target fit with the SPX weekly chart? Reasonably, rising channel resistance from the 2011 low has already been tested twice without a return to test channel support, but while a third test is rarer, it is far from unknown. Primary rising channel resistance is also currently in the 1930-40 area and is rising at about 15 points per month. SPX weekly chart:
NDX closed at 3635 yesterday, and I gave the 3635 area as the ideal right shoulder high on 21st April. A general break up from here would obviously now weaken the H&S setup and invite a test of the current all time highs, which I'd be seeing as the likely second high of a double-top that would target the same area as the failed H&S setup. NDX weekly chart:
RUT has been beaten down so hard lately that the trailing PE ratio has been beaten all the way back down to 73.3 (as of 16th May). Is there a buying opportunity at these depressed levels? Well again, if there is a general break up then it is very possible that RUT may have finished the head on a large head and shoulder pattern. Ideally the right shoulder there would peak in the 1182 area by the end of June. RUT daily chart:
Looking at the oil chart the obvious next target for WTIC/CL is the 105 area. That area is strong resistance but if broken it would open up a test of the 2013 high at 112. A strong reversal could start a slide back into the 80s so 105 is worth watching carefully. WTIC daily chart:
I'm still leaning short here, and don't think that a strong new high on SPX is likely. I'm leaning towards seeing a failure short of the high or a marginal new high before turning back down again. However, the only way to find out for sure is to see what happens here, and as I have detailed above, my alternate scenario is workable and could play out. My preferred scenario is that SPX has already topped or will make a marginal new high in the near future, but as long as bulls can hold above the 50 hour MA on SPX, they have another shot at breaking into the 1900s.

Wednesday 21 May 2014

Significant Bull Fail

I was saying yesterday morning that the bears needed a fast and hard rejection at the SPX 50 hour MA, and that's exactly what we saw. That was a serious bull fail, but they could still repair the damage by breaking back over the 50 hour MA with confidence, and that closed at 1883.30 yesterday. SPX 60min chart:
On the daily chart SPX broke back down below the middle band, which was bearish. The last two times that there was a candle setup like the last two days (first day break through band with confidence, second day strong rejection and break back through the middle band with confidence), the rejection followed through hard on the third day in the direction of the rejection. That leans bearish today and the bears have another shot at breaking support in the 1850-60 zone at double top support at 1859, rising support from 1737 in the 1855 area, and the late April low at 1850. SPX daily chart:
Which way is this likely to break? Well I was already leaning towards the bear side and yesterday's bull fail has only increased that bearish lean. I was saying in early May that the 1891 high seemed unlikely to be the second high of a double top because there was no negative divergence on the NYMO, and I'd generally expect to see that at a significant high. That's no longer the case since the 1902 high and NYMO looks ready to drop here. SPX vs NYMO daily chart:
One thing I hear quite a lot is that if a topping setup is obvious then it will usually fail. I've charted a lot of bull markets including every bull market on SPX since 1923, and that rule would have disqualified most major highs since the index was formed. The view is very mistaken. Some setups like the one we see below have failed to deliver a serious reversal, but most delivered in spades. This is a simply beautiful technical setup from the 2011 low and this reversal setup means that SPX has topped or is likely to in the very near future, and the chances are that this setup will deliver a strong reversal to at least rising channel support in the early 1700s. SPX weekly chart:
The other thing I hear is that the Fed will never allow a significant reversal. I recall having similar conversations with traders in early 2011 when I suggested that exiting longs as QE2 ended would most likely be a smart move. That view was wrong then, and with QE3 winding down rapidly here, most likely wrong again now. The obvious reversal setups that I have shown on SPX are also forming on most other US indices and the very nicely formed example below is son Dow, which like SPX has a big reversal setup targeting a retest of broken resistance at the 2007 high, which I was saying a year ago was the obvious target for any big retracement. INDU weekly chart:
I've mentioned that the daily candle setup for the last two days strongly suggests bearish follow through today. I'd add to that the 60%+ bearish stats for today historically, and that Master The Gap likes the odds of a gap fill today. I'm leaning strongly towards some bearish follow through today and that could extend to a break down through major uptrend support in the 1850-60 area. If we see that, I'd strongly advise against buying that dip.

Tuesday 20 May 2014

Bear Necessities

SPX broke back over the daily middle band yesterday, and bears need a swift reversal or the next obvious target will be a test of the daily upper band, now at 1896.5. SPX daily chart:
That wasn't main resistance here however. What I've been looking at for that is the SPX 50 hour MA, which was broken slightly at the close yesterday with the close two points above it. If bulls can follow through and turn the 50 hour MA into support, the next obvious target will be a retest of the high, and on a conviction break above that, a test of rising wedge resistance, currently in the 1930 area.

Bears need a swift reversal here to start the next leg down. A break below the 1859 low and then the 1850 low will open up the downside. SPX 60min chart:
Time is running short for the current very nice looking topping setup on NDX. I posted this possible H&S forming on NDX on 21st April and so far the right shoulder is ideal, and as long as NDX goes no higher and the neckline in the 3415 area is reached in the next week or two, this will be a textbook H&S. Any higher or any longer and the quality of this H&S will erode. NDX daily chart:
TLT reached my megaphone resistance target late last week, and I'm expecting this to break up through that soon. I was asked yesterday what would change my mind, and I replied that a break below rising support from 100.17, currently in the 110 area, should mean that TLT is returning to megaphone support. We'll see how that goes. TLT daily chart:
If the current topping setup on SPX, NDX and elsewhere is going to play out, then it needs to happen shortly, and the best chance to do that here is for SPX to fail here at the 50 hour MA. If we see a swift and hard rejection there today then the next leg down should be starting, as long as bears can then break below 1859 and 1850. If bulls break up and hold above the 50 hour MA, then the alternate scenario with SPX going for a test of rising wedge resistance in the 1930-40 area should then be more likely.

Monday 19 May 2014

Middle Band Retest

Just a short post on SPX only today as I have work being done on my internet setup this morning.

For the second week the weekly candlestick on SPX was a long legged doji. These are indecision candlesticks, but don't give any clues to direction as the breakout direction is random. If we see a break up then the weekly upper band is currently at 1903.6, close to a retest of the current high, and on a break down the middle band is currently at 1845, slightly under rising support from the 1737 low. SPX weekly chart:
On the SPX daily chart the rally on Friday afternoon retested the daily middle band, and the close just just underneath it. A break with a daily close more than 4 points back above the middle band would be bullish. Worth noting here is the now very narrow daily bands, which is telling us the we are likely to see a move start shortly that will hit an outside band and then rise the band in a powerful; move for several days. The last similar pinch was in January and was resolved in the fast move down into the 1737 low. SPX daily chart:
If we are to see further downside then a natural place to see that start is at the retest of the daily middle band, so we may well see a move down resume today. If we see some more upside then there is obvious resistance in the 1880-4 area at broken rising support from 1814 and the 50 hour MA at 1883. A break back over the 50 hour MA would be bullish. SPX 60min chart:
This could break in either direction, but my lean is bearish, and I'm expecting to see this rally fail either at the middle band test or at the 50 hour MA test. I could be mistaken however. A break below the last significant low at 1859.79 would be bearish, and a break below 1850.61 should confirm a break downwards. whichever way the next break goes it will most likely break hard and run some distance.

Friday 16 May 2014

The Great Brain Robbery

The decline yesterday was dramatic, but not sufficiently dramatic in my view that we should now assume that the spring high was made on Tuesday. Bears will need to follow through and close below 1850 SPX before that assumption can reasonably be made.

I'm just looking at SPX and bonds today but I will just mention that the low on RUT yesterday was at 1082.53, still in the lower range I gave yesterday morning for a possible bullish recovery, and that NDX didn't break rising support from 3414, though it came very close to testing it. There is a strong argument that this decline has limited the scope for further upside however, and if we should see a strong recovery from yesterday's lows then I would mention that something often seen at significant highs is a sharp spike down before the main slightly higher high. This is a common way to set up a double top.

On the SPX 60min chart the 50 hour MA was broken yesterday morning and then the breakaway gap at 1878-80 was filled. That kills off the idea that a new impulse move upwards had started with that level as the breakaway level for the move. The next level of support is the last low at 1859.79, and then rising support from 1737 in the 1850 area, which is now key uptrend support. If we see a bounce today I would put my bull/bear level at 1878-82, as that would be the retest level for broken rising support from 1814, and also the likely range to break back over the 50 hour MA, which closed at 1882.70 yesterday and is currently declining. SPX 60min chart:
No real damage has been done on the daily chart as yet. The daily middle bollinger band was broken, but that isn't bearish because SPX followed through to test the daily lower band. The low was two points higher than the lower band and I would score that as a technical hit. There was a pinocchio below the 50 DMA, but SPX recovered back above it before the close, and you can see from the chart below that  there were similar pinocchio/recovery candles at both the 1850 and 1859 lows, both of which were followed by strong rallies to higher highs. As long as SPX neither opens nor closes significantly under the 50 DMA it is still unbroken support. SPX daily chart:
Yesterday was a very significant day on bonds, as we have reached an important inflection point that I have been watching for since calling a breakdown and short opportunity on TNX on 7th January (at 29.61). You can see that post here, and the TNX chart I posted that day here. I was looking for a move to test possible double-top support at 24.71, and the low yesterday was 24.73, so that double top support is now being tested. If we see a break down through double-top support then the pattern target will be 19.06. TNX weekly chart:
On the TLT projection I did at the same time, though not posted then, I was looking for a move to broadening wedge resistance and after four slow months of inching towards that it was reached and very slightly broken yesterday. I'm leaning towards a break down on TNX and break up on TLT here, and if we see that I'll do another projection for the next few months. That may not be quite as accurate as my January projection which was so close in price and time that I never even had to adjust the arrows. TLT daily chart:
This move on bonds was easily predicted from the pattern setups and (duh) looking at what happened to bond prices and yields at the ends of both QE1 and QE2. The move itself has been slow and frankly rather boring, but what has been very interesting is what it has shown about the enormous strength of the almost universal belief that QE depresses bond yields.

There is some reason for this belief. It makes sense that the Fed buying lots of bonds would boost bond prices and depress yields, with an expectation that would be reversed at the end of the buying period. Furthermore we are told often by the Fed that QE depresses bond yields and that the end of QE might trigger a dangerous rise in bond yields. It all hangs together well and is backed up on a daily basis by talking heads talking about this relationship as though it was a known fact.

The trouble is that as soon as you actually look at the data, it is obvious not only that there is nothing to demonstrate such a relationship, but further that the price moves in QE1 and QE2 are very strong evidence of the opposite, that QE historically has boosted bond yields and depressed bond prices. Why is this the case? Hard to say, and I don't generally pay much attention to fundamentals, but perhaps because Fed intervention in the bond market is more than cancelled out by non-government investors exiting the market, and there is an obvious rationale for that. If there is truly a multiplier effect from Fed bond purchases that disproportionately drives/attracts buyers into equities from other sectors, then perhaps many or most of those new buyers of equities come out of the bond market,  which would then depress bond prices and boost bond yields. That may not be the reason but that would be logical.

What is clear from this powerful belief is that very few analysts have troubled to look hard at the data, and the consensus view on bond yields has been so entirely wrong over the last few months that the very few analysts actually basing their forecasts on the data have been regarded as crazed voices in the wilderness. The reaction to my bond forecasts over the last few months has been better than if I had suggested that the Fed was being run by reptilian aliens and that QE was an alien plot to bankrupt the world in order that the human race could be farmed for food, but not an awful lot better. I have had quite a few people point out to me that I must be mistaken because everybody knows that bond yields would rise as QE3 tapered off, and then seem uncomprehending when I replied that there was no actual evidence to support that belief.

This belief has also been strongly supported by the Fed, but that doesn't mean that the Fed were lying. More likely they were also relying on analysts that weren't checking the data, as almost everyone seems to have been doing. Everyone assumes that the Fed must employ competent analysts but there's not much to support that view from their forecasting record. My own view is that people just assume that the Fed know what they are doing because the alternative is just too scary to allow them to sleep easily at night. That too fits the historic data somewhat better.

Anyway, just in case there are any huge bond funds reading this post, then I would add that I have called all the big turns on bonds correctly over the last few years, and can demonstrate that easily from my blog archive. I'm a busy man but in the event that I was offered highly lucrative consultancy work forecasting future bond moves then I might well be able to squeeze that into my schedule :-)

As for SPX today bulls need to hold the last low at 1859.79, and that should hold if we are to recover to new highs. If that breaks then very important trendline support is in the 1850 area, as well as the 1850.61 low. If we see a close below those then my view would then be that the spring high was most likely made on Tuesday, and the next obvious target would be at 1814.

Thursday 15 May 2014

Who Knew?

SPX held the SPX 1min rising channel for a while yesterday, but then it broke and we have been seeing a more substantial retracement. Could the Spring high now be in? Yes, but we're really going to need to see some more evidence before assuming that, and that's what I'll be looking at today. 

There's not much to say on the NDX chart other than to reiterate that a failure at this week's high would be an ideal right shoulder high on the very large H&S that has been forming there. I'll therefore start with RUT where RUT is now back within the falling channel that broke up on Monday. That situation isn't at panic stations yet and a low near yesterday's close in the 1100 area would be an ideal right shoulder low on a possible IHS, and a  low in the 1080-90 would make a possible second low on a possible larger double-bottom. Under there the bullish options get much thinner, but until then the bullish scenario is still in play. RUT 60min chart:
On SPX I've been saying since the break up on Monday that the breakaway gap at 1878.48 SPX needs to remain intact until the breakaway move is complete. That is therefore very important support today and if that gap is filled that will look pretty bearish. If that is filled then I have rising support from 1814 in the 1873-5 area, and rising support from 1737 in the 1850 area. If 1850 is broken then then next target on the road to 1570 will be double-top support at 1814. SPX 60min chart:
The daily middle band closed yesterday at 1878 so with the unfilled breakaway gap 1878-80 is very important support today. If we see a break under the middle band then support at the 50 DMA is at 1868. If 1868 is broken then the spring high is most likely in. SPX daily chart:
I posted the beautiful rising channel on AAPL from the lows on twitter yesterday and thought I should post that again here today. Rising channel resistance is in the 640 area and the current consolidation looks like a bull flag. What does this tell us about the broader market? Not much, correlation has been strong over the last year, but there was little on no correlation the year before that. AAPL daily chart:
TLT is still progressing towards the falling megaphone resistance that should be the key inflection point for the rest of the year. Not far away now. Here is the updated projection I did in January. TLT daily chart:
On this last chart I've been reading with some bemusement articles about the strange move on bonds in recent months and laughed aloud when I read yesterday night about Jeff Gundlach's crazy prediction back in January that bond prices would do since then what they have done. I predicted the same and I haven't even had to move any arrows. How have Jeff and I achieved this forecasting miracle? Well that's a pretty obvious falling megaphone, and unlike almost everybody else, when consider what might happen to bond prices as QE3 winds down, I and I assume also Jeff, looked back to see what happened at the ends of QE1 and QE2. So far things are playing out now much as they did then. Who knew?

Do or die for the bulls today. If Monday's breakaway gap is filled then further downside will open up, and every step down will make it more likely that the spring high was made on Tuesday, and that we now have months of retracement ahead of us. I'm expecting a test of support at 1878-80 SPX today, and we'll see what happens there.