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Friday 27 February 2015

Channeling The Second Mouse

SPX has still not reached my wedge resistance trendline target in the 2130 area and might not of course, but my working assumption is that this uptrend will be incomplete until that is tested. I could be mistaken however. SPX daily chart:
The US indices are looking increasingly cooked now, with all but NDX having broken trendline support from the last low now. Possible H&S patterns are forming on SPX, INDU and NYA. Reversals are coming soon but I'm thinking that the bulls need to push SPX just a little further. Screen 3x 15min SPX INDU TRAN:
The NDX support trendline confirmed with a third touch at the low yesterday. I'll be watching that as a key indicator as to when this uptrend is failing seriously. Screen 3x 15min NDX RUT NYA:
CL has been very interesting this week. A falling wedge had formed and broken up with a bullish looking double bottom setup. I always look at the possibility that a falling wedge might at this stage evolve into a falling channel or megaphone but this one caught me by surprise by evolving into a larger falling wedge. These wedges break down about 30% of the time but the natural break would be up into a target in the 55 area and a possible extension on a conviction break over 55 into the 62 area.

With CL under 49 as I write there is a long entry here with a stop at 48.5 (very cautious), 48 (cautious) or 47.5 (less cautious) with a view to taking half at 55 (moving stop on remainder to 52) and a chance of getting 62 on the other half. Nice looking risk/reward trade. I am long CL here. CL 60min chart:
I mention regularly that before a significant high or low is made, ranges expand to allow trendlines to break and reversal patterns to form. This is not generally a case of the early bird getting the worm, as those who pile in at the first signs of weakness generally regret it. Instead this is more like the second mouse getting the cheese, where the first responder makes the supreme sacrifice to enable the second mouse to take the cheese from the mousetrap at leisure, and with much reduced risk.

If the high has already been made, which I doubt but maybe, then I'd be looking for a failure in the current 2112-4 area as the right shoulder high on a double top . My preferred option would be a test of the 2130 area. We shall see how this develops. Key supports here are the support trendline on NDX and the SPX 50 hour MA at 2106. The 50 hour MA has been tested three times in the last few days but has held each time so far.

Apologies for the late post today. I'm feeling a bit washed out. I shall try to catch up on sleep at the weekend. TGIF! :-)

Thursday 26 February 2015

One More Heave

SPX made a higher high yesterday but still hasn't yet made my upside target at wedge resistance. My working assumption is that will be hit today or tomorrow. Important support is at the 50 hour MA at 2103/4. We may see a spike down before the high is made to set up the reversal pattern. If so I'd be looking for decent support in the 2100 area. SPX 60min chart:
On the pattern setup all the indices are looking close to cooked now. SPX broke rising support again yesterday. Screen 15min 3x SPX INDU TRAN:
NYA also broke support and RUT has never established a new support trendline after the break down last week. These all look close to reversal. Screen 15min 3x NDX RUT NYA:
If I'm right about the pattern setup then we should see a touch and reversal at wedge resistance in the 2130 area before any significant retracement gets going. That would need to be in the next couple of days really as this setup is really looking increasingly cooked. I'm going to take a flyer and suggest that we could see early weakness followed by a drive up today. You read it here first :-)

Wednesday 25 February 2015

Getting Close Now

SPX is approaching wedge resistance and broken trendline support, and those should intersect in the 2130 area tomorrow or Friday. Ideally the next short term high will be made there in that timeframe. I'm not expecting any overthrow because I'm expecting this high to retested and exceeded within a few weeks. That is when we may see an overthrow as SPX tests main resistance somewhere (by then) in the 2150-2200 area. SPX daily chart:
I was saying on Friday that most of my optic run charts from the last low didn't look cooked yet. That's no longer the case and these all now look ready to break down soon. Screen 3x 15min SPX INDU TRAN chart:
In the case of RUT we may well have already seen the high now, though it might crawl up a little further. Screen 3x 15min NDX RUT NYA chart:
Support is at yesterday's low at 2105.87 and the hourly 50 MA which is now at 2100.16. A break below yesterday's low would be a warning sign, and a break below the 50 hour MA should signal that the indices are have topped or are topping for now. If we see a hit of the 2125 to 2130 area today that would be a very attractive short entry. We may well see an early dip that gets bought.

Tuesday 24 February 2015

Minority Reports

I'm ready to do a projection of what I am thinking may well happen on SPX over the next twelve months. My main scenario is this, and variants of the same scenario. It's a good fit with the pattern structure, and the first month indicator for 2015 that indicated strongly that 2015 would at best be a flat year.

Does this match any other forecasts that I'm reading? Well no, most are far more bullish and they could be right, but I posted an even more minority view projection for bonds at the start of 2014 to general incredulity, and price then followed my arrows very closely for the next six months as everyone betting on the almost universally expected big bonds decline got a very nasty surprise. We'll see whether this projection fares as well as that one did. SPX daily projection 150224:
No much else to add on SPX today after yesterday's inside day candle so I'll look at EEM today. I posted a chart last September saying that the obvious next target on EEM was triangle support in the 38 area. That overshot slightly and reversed back up. The next obvious target is triangle resistance in the 45 area. EEM weekly main chart:
Will EEM get back to 45? I think so but there is a significant hurdle to overcome on the way as EEM is currently stalling at IHS neckline resistance. On a sustained break over that neckline the IHS target would be in the 45.2 area, so that should deliver that triangle resistance hit. This neckline is a possible failure area however, so we need to see that neckline break. EEM daily main chart:
SPX is in a sideways consolidation and that may continue for another day or two, and on a break below yesterday's low we could see a move to retest the 2095 area. We may well break up earlier though, and as and when SPX does break up from here, my target at wedge resistance is in the 2125-30 area.

I have an important update on oil that I haven't had time to include today and will be posting that on twitter in the next hour.

Monday 23 February 2015

Support at the 50 Hour MA

SPX didn't make it to my minimum retracement target at 2080 as it made a perfect touch of the 50 hour MA and reversed hard there. That does tend to be solid support in uptrends until they are into the topping process and, as I was saying on Friday morning, this uptrend doesn't look finished yet.

I am considering the possibility that a rising wedge from the October low is still forming and have drawn in that possible rising wedge support trendline in blue dotted line on the chart below.  If that is the case then there is a very obvious target in the 2120-5 area at the intersection of the original wedge support trendline and the wedge resistance trendline. That is the first area of resistance that I am watching. SPX 60min chart:
If the wedge overthrows that resistance area then my last area of resistance is at the weekly upper band and primary trendline resistance, now in the 2145-50 area. If tested I am expecting that area to hold as resistance. SPX weekly chart:
Overnight CL has broken hard below double support at triangle support and the daily middle band, both in the 51.2 area. Unless that is quickly reversed the obvious next target is a reversal back down to the main low at 44.39 and I have marked the three targets in the 43.7 to 45 range on the chart below. CL daily chart:
On 3rd February I posted a TLT chart showing the test of lifetime rising resistance and the possibility that we would see hard reversal there. We have seen a hard reversal there and I am working up a roadmap for what I am expecting to see on bonds this year. The next moves would ideally be a move to test megaphone support in the 120 area, and then a retest of the lifetime high at 138.22. TLT weekly chart:
I have the weekly pivot at 2099.2 this morning and am looking for a test of that at the AM low, and possibly lower. That AM low, wherever it ends up, will most likely be a buy, as the bulls remain firmly in control of this market for the moment.

Friday 20 February 2015

Weak High

I've had a few questions about whether I think that the uptrend from 1980.90 is over and on balance the answer is no. The reason why is on the charts below showing the patterns from that low on SPX, Dow, TRAN, NDX, RUT and NYA. Only two of those show decent patterns from that low and they are SPX and RUT. I could be mistaken but I'd be expecting most or all to show decent patterns at a strong high.  If we see a break back down through the daily middle band at 2056 I'd look again.

Screen 3x SPX INDU TRAN 15min chart:
Screen 3x NDX RUT NYA 15min chart:
On a break below yesterday's low the double top target on SPX would be 2080. I'm expecting to see that area hit at least. We'll see after that whether the bears might have a bit more life left in them.

Thursday 19 February 2015

Rising Wedge Broken

The rising wedge I was talking about yesterday morning broke down and retested during the day. We are likely to see some retracement here and possibly a significant high. If we are looking at a retracement my minimum target area is the 23.6% fib retrace in the 2073 area, but my usual target range would be the 38.2% fib at 2055, the 50% fib at 2041 and the 61.8% fib at 2026. I would note that the daily middle band closed yesterday at 2053, so we might see a retest of the daily middle band. SPX 5min chart:
If we were to see a full reversal here then I have a scenario where SPX has just made the second high of a double top that would target 1860.40 on a break below 1980.90. I'll be upgrading that scenario if we see a clear break back below the daily middle band. I have a 60min RSI 14 sell signal triggered yesterday which is strongly suggesting retracement here. SPX 60min chart:
On the daily chart the RSI 5 is overbought but as there has been no pullback there is no negative divergence. There is some negative divergence on NYMO but unless we see a serious break of support then I'll be assuming this is just a retracement before another push up. SPX daily chart:
CL is at an inflection point here testing triangle support and the daily middle band. If it breaks down I've sketched out the path I'd be looking for in blue arrows. If CL bounces at support here then I'll be looking for the path I've sketched in red arrows. CL daily chart:
My lean is bearish looking for at least a test of the 50 hour MA at 2077 area with the 23.6% retracement at 2073. If we see a break down below that area I'd be looking for the 38.2% fib retracement area around 2055.

Wednesday 18 February 2015

Ten Handles a Day Uptrend

I don't have the pattern for the current move up yet. I have three rising wedge resistance trendline options, and a rising channel option but the pattern will only be crystallised on the next test of the main rising support trendline from the 1980.90 low. That may be tested at the open today, and if so SPX is in a rising wedge that has already overthrown and the uptrend is topping out at the moment.

If that trendline holds then it is rising at ten handles every trading day and this move up will need to accelerate from what we have been seeing so far this week to keep up. SPX 5min chart:
On the daily chart we saw what was arguably the third day of an upper band ride yesterday, though the upper band was never touched and closed at 2005. That's likely to close over 2010 today and if we are still in an upper band ride I'd be looking for at least a test of that level today. SPX daily chart:
This uptrend has been moving up solidly but has been slowing down since the 2041 test. If bulls want to hit the 2135-50 targets on this move then this move needs to accelerate today. If not then rising support closed at 2092.50 yesterday and a break below should put SPX in a short term topping process with main uptrend support at the 50 hour MA at 2073 and the daily middle band at 2048.

Tuesday 17 February 2015

Reality Sometimes Bites

ES had a bit of a retrace yesterday as some of the good news at the end of last week unravelled. The Greek talks have collapsed for the moment, and may well fail as it is plainly in the interests of Greece to leave the euro and default on their debt, rather than continue to destroy their economy by trying to stay inside the Euro. The Ukraine ceasefire seems to be failing as the main parties involved seem to have assumed that the ceasefire would not apply in areas where there is currently much fighting. Any agreement involving the Russians, who gave a firm treaty undertaking in 1994 to guarantee Ukraine's sovereignty and borders in return for Ukraine giving up their extensive nuclear arsenal, has major credibility issues in any case.

For the moment there is some negative divergence on the 60min RSI and a decent push down here could break that down into a sell signal. I have possible rising wedge support in the 2080 area, and main uptrend support at the 50 hour MA at 2067.40. SPX 60min chart:
On the daily chart Friday was the second day of a possible 5min upper band ride. This could fail at any time of course, but the bulls have the ball as long as it lasts and if it persists into this week then the obvious targets are in the 2135-50 area. SPX daily chart:
Those targets are the weekly upper band at 2136 and strong trendline resistance in the 2140-50 area. On any move up here I am not expecting that trendline resistance to be broken, though I could of course be mistaken. SPX weekly chart:
As long as trendline support holds (now at 2080 area and rising) there's there's little of interest on the short side here. In the absence of evidence to the contrary I'm treating this as a daily upper band ride and the daily upper band, now at 2097 and rising rapidly, as an anchor. An hourly close below the 50 hour MA would get me interested in the short side again.

Friday 13 February 2015

Friday the Thirteenth

I'm feeling better than I did yesterday. I should be fully recovered by Monday I think and normal service will resume.

SPX has made visual (near miss) hits of the daily upper band yesterday and today. SPX has also made a new all time high today and is at the first major resistance area to look for a possible hard fail. If there is a serious break up here then we should move up to the next big level of resistance. SPX daily chart:
The next big level of resistance is on the weekly chart, at the weekly upper band, now at 2136 and just below main trendline resistance. If hit I would be expecting this area to hold and provide a very nice short entry. SPX weekly chart:
How will we tell if there is strong rejection at the current highs resistance area? The first very bearish sign would be a break below rising wedge or channel resistance, as that break would confirm this as a rising wedge, and open up wedge retracement targets in the 2051 (38.2% fib), 2038 (50% fib), and 2024 (61.8% fib) areas. If bears could then deliver a conviction break back below the daily middle band, now at 2044, then there would be a possible double top setup that would target the 1866 area on a break back below the last low at 1980.90. That would be a decent match with my main rising support trendline from the 2011 low so I'm watching this resistance test with great interest. SPX 15min chart:
I'm not going to get particularly excited by the short side here until we see a break below rising wedge/channel support, now in the 2075-80 area. Everyone have a great weekend.

Thursday 12 February 2015

Bring Out Your Dead

I'm not well today as my daughter caught a nasty cold/flu bug at school and has successfully passed it on to me. This is a short post for today and I'll do the same tomorrow. Looking at my daughter this week I'd expect to be largely recovered by Monday:

On the daily chart we now have a clear break over range resistance with the open this morning above that. The obvious targets now are a retest of the high at 2093.55 and the daily upper band at 2088.97, though that might well be in the same area as the all time high by the time that it is reached. SPX daily chart:
On the 15min chart I have a decent rising channel from the 1980.55 low and until that breaks down the short side here isn't going to look particularly interesting. SPX 15min chart:
Obviously SPX is on the path to retest the highs that I was talking about on Monday morning on a break over range resistance. My lean here favors a test of the highs and failure there but if SPX can break the highs with confidence then I now have major resistance in the 2130-40 area. I'm not expecting a move to test that resistance yet but I'm definitely not ruling that out. 

Wednesday 11 February 2015

The Three Bears

SPX regularly has runs where patterns repeat and we have a series here at the moment, with a bearish rising wedge from the October low that retraced 38%, into a bearish rising wedge from 1980 that retraced 38%, into a bearish rising wedge from Monday's low at 2042. Will we see a 38% retrace of that wedge this morning? We shall see. :-)

On the daily chart yesterday's close was the first close outside the marked trading range in 2015. If bulls can turn that broken range resistance into support then I would expect to see a test of the all time high within days. SPX daily chart:
The move up from the 38.2% retrace of the medium sized wedge is, as with the move up from the 38.2% retrace of the large wedge above, either making the second high of a double top or starting a move higher. The key is Monday's low at 2041.88. on a break below that this setup is either a double top or a bull flag, and on a sustained break the double top target would be in the 2010 area. SPX 5min chart:
The small rising wedge is the move up from Monday's low. That overthrew bearishly at the high yesterday and has pinocchioed the wedge support trendline at the open today. On a sustained break down from wedge support I would be looking (on the bull scenario) for a fib retracement into one of the main fib retrace targets in the 2060, 20-56.5 or 2053 areas. On the bear scenario we would now see a full retracement back to retest Monday's low at 2041.88. SPX 1min chart:
This could break either way here. I'll be leaning long today after a fib retrace of the small rising wedge unless we see a break below Monday's low at 2041.88.

Monday 9 February 2015

Mixed Signals

The first thing to say today is that though Friday had much to please the bears, the weekly candle did some serious technical damage to the bear case for the next couple of weeks at least. That's because the candle reversed the break below the weekly middle band of the week before, and while it's possible that might be reversed again this week, that would be rare, and the odds strongly favor a flat to up week this week and a move significantly higher than Friday's high over the next by the end of next week. While I'm looking for some downside early this week, that may be very short-lived. SPX weekly chart:
On the daily chart SPX reached the top of the range and pinocchioed it slightly to make the IHS target at 2069. There was then rejection and the close was back well within the range. I would expect some follow through on the downside today and would expect a test of the 50 DEMA and the middle band in the 2031-4 area, most likely today. SPX daily chart:
All the rising wedges that I was looking at on Friday morning broke down in the afternoon and all of them formed H&S patterns that were looking lower. The H&S target on SPX is in the 2042 area, but I'm expecting a bit lower to test the daily middle band. 3x chart screen 15min SPX INDU TRAN:
All of these H&S patterns broke down on Friday afternoon and none of them have made target yet. 3x chart screen 15min NDX RUT NYA:
The key test for today, if seen, is the test of the daily middle band on SPX in the 2031/2 area. If bears can break back below that and sustain that break then that opens up another possible test of the range support area around 1990. The weekly candle from last week however is telling us that the SPX daily middle band will most likely hold, and that we may well see a test of the all time highs at some point in the next few days, though I'd expect that test to make the second high on a double top.

Friday 6 February 2015

Seven Brides for Seven Brothers

SPX had a strong day yesterday and came within two points of testing range resistance in the 2064.5 area. We should see today whether bulls can break over that strong resistance. If they can't then support is at the daily middle band and 50 hour MA in the 2031 and 2026 areas respectively. SPX daily chart:
So which way is the market going to break at this big inflection point? There's only one way to find out for sure but when I looked at my seven US indices last night to see if there were any clues there, I found that all seven had formed 69% bearish rising wedges from the last low. The first three of those are on SPX, INDU and TRAN below. Screen 3x 15min SPX INDU TRAN chart:
The next three are on NDX, RUT and NYA below. The last of the seven is WLSH and I won't show that today but it's similar to the others. Screen 3x 15min NDX RUT NYA:
I have CL in a likely rising channel from the current low and it could reach my declining resistance in the 58/9 area within that channel. CL is a buy on dips until that target is reached or rising channel support is broken. CL 60min chart:
It's important to remember that although rising wedges are 69% bearish, that does mean that they break up 31% of the time. These patterns are very much leaning bearish, but the bulls still very much have a shot here. I would start getting edgy about the bear case here on a move much over 2064.62 SPX. Until then I'm leaning bearish and caution is required until after the NFP number which is out an hour before the market open.

Thursday 5 February 2015

The ES Triangle

The late decline yesterday was interesting for a few reasons. The most important of those was that it was a failure at triangle resistance on the ES daily chart. That has been tested again in globex and is holding so far. The bulls either break over that triangle resistance today or the only available direction will be down. ES daily chart:
Another interesting point from that decline is the stranded double top that has been left on SPX. That double top formed and broke down yesterday with a target at 2028 SPX. That was just retesting broken support at the close and then the same pattern on ES, with a target at 2022.25 ES, made that target in globex and has since retraced almost all of that decline. Is that SPX double top still in play? We shall find out this morning. SPX 5min chart:
On the daily SPX chart the bulls are in charge unless we see another break back below the middle band at 2030. That double top target, if reached, would be a test of that middle band support of course. SPX daily chart:
Today is all about triangle resistance on ES. Can it be broken? If so can the break be sustained? On a failure there I'd be looking for support at the daily middle band at 2030 SPX. On a strong break down there I'd be looking for another test of range support in the 1990 area.

Wednesday 4 February 2015

Bullish Breaks

The double bottom on SPX broke up yesterday with a target in the 2069 area, slightly above range resistance in the 2064 area. I'm looking for some retracement this morning to establish a rising support trendline. SPX 5min chart:
On the SPX daily chart SPX broke back over both the middle band and the 50 DMA. The next obvious target is the daily upper band, currently at 2069, and at the same level as the double bottom target of course. SPX daily chart:
On CL a smaller double bottom has already played out and CL is testing resistance on a larger double bottom that would target 59.88 on a sustained break over 51.73. That would be a decent fit with declining (possibly megaphone) resistance and I think this might well play out. This current move should be the strong rally before the low that I have mentioned a few times and after this move ends I'll be looking for a retest of the lows to continue to set up a larger bottoming pattern. CL daily chart:
I'm looking for some retracement to set up a decent rising support trendline on SPX but as long as we don't see a break below yesterday's low at 2022.71 I'm looking for a move back to test range resistance in the 2064 area and very possibly a hit of the double bottom target in the 2069 area.