- 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.

Friday, 31 July 2015

Will The Remaining Living Bear Please Stand Up?

Yesterday saw a sharp decline into an early morning low that was given back in a grind up for the rest of the day. The low was an almost perfect test of the daily middle band, and that may well be it for the retracement I was expecting. If not though then of course I was saying yesterday morning that more might be needed to be done on forming short term topping patterns, and I'd note that five of my six optic run charts now have nice looking possible double-top patterns, and the sixth is right at resistance and was turning down there at the close last night. SPX has now formed a very nice looking falling channel from the last two highs and if that survives into the open, then overall this is a potentially bearish setup for today. SPX 60min chart:
I've been looking for secondary patterns on my optic run charts established at the low yesterday and have a decentish rising channel on SPX that closed on the support trendline. There is now a larger decent quality rising wedge on INDU that also closed on the support trendline. No secondary pattern on TRAN yet but no real need for one either. All three charts have decent looking double top setups and anything below yesterday's close on SPX and INDU will be a support break. 3x 15min SPX INDU TRAN charts:
NDX is the only one of these six not showing an obvious double-top setup, but the secondary pattern there is a rising channel, and NDX closed the day close to channel resistance. Unless NDX gaps over channel resistance at the open, which looks possible, then NDX is leaning short here. RUT has formed a secondary rising wedge  and closed the day well above wedge support. NYA has formed a secondary rising channel (doubtful quality) and closed the day at rising support. Scan 3x 15min DX RUT NYA charts:
As the weekly candle fixes at the close today bulls want to break over the weekly middle band at the close to break back over it on the weekly closing basis.  That is currently at 2099.22 and bulls want a close at 2102.00 or higher for a clear break back above. SPX weekly chart:
The stats are bearish today and the pattern setup is unambiguously bearish. To change that bulls would like a gap up that doesn't fill, and if they manage that then I'd expect a strong day with a possible target in the 2126 area to entirely bullishly reverse last week's weekly candle, that entirely bearishly reversed the previous week's bullish breakout weekly candle. If we see SPX  over 2115 this morning that would be the obvious target area today in my view, though it would really be a strange thing to see. If that does happen however, it would be a solid confirmation of the new support trendlines on SPX, INDU and NYA, which would be useful later.

Thursday, 30 July 2015

Six Retracements for Six Broken Wedges

Another very strong day from the bulls yesterday, and both of the breaks above the daily mid band and the 5 DMA were strongly confirmed on SPX. That doesn't kill off any bear case altogether here, but it means that rather than trying to prevent a break up, bears would now have to break back down. My lean is bullish and I'm not really expecting bears to break back down, but I am expecting to see some retracement today, and I've put the key levels on the chart below to show what bears would need to do. SPX 5min chart:
Looking at my optic run US index charts, there are an impressive six out of six rising wedges from the lows, all of which have broken wedge support. There may be more to do on these in terms of forming short term topping patterns, but I would expect retracements very shortly, with minimum targets at the 38.2% fib retracements. We'll see how that goes today. Scan 3x 15min SPX INDU TRAN charts:
If I was to see anything to encourage the bears on these charts I would note that apart from TRAN, which tends to plough a lonely furrow in any case, the largest moves were on SPX and NYA, both retracing slightly over 61.8% of the move down into Monday. Dow only managed 50% and NDX and RUT only 38.2%. No bullish breaks on Dow, NDX and RUT as yet, though SPX and NYA are the deepest and broadest indices in terms of sector spread. Scan 3x 15min NDX RUT NYA charts:
Bears get a shot at trying to reverse this back down today, though that looks hard and I'm doubtful about them managing that. We should see a decent retracement regardless today though and if bears can't break this back down, this should be a decent dip to buy.

Wednesday, 29 July 2015

Testing Important Resistance Zone

The bounce scenario that I posted on twitter on Monday night played out and then some, and the SPX highs yesterday started to break significant levels that I would prefer to see unbroken, with a break over declining resistance from the last high, and small breaks over both the daily mid band and the 5 DMA. This is a very important inflection point and bears must deliver a red day today to avoid confirming those small bullish breaks today. Bulls want to confirm yesterday's breaks and also break through the remaining important resistance levels in this area which are as follows:

  • 2095.00 - 100 day MA
  • 2098.37 - 50% fib retrace from 2132.82 high
  • 2098.45 - weekly middle band
  • 2100.60 - 50 day MA
  • 2102.71 - 50 hour MA (dropping fast)

On a close below 2090 (ideally under 2085) today yesterday's small bull breaks are negated. On an hourly close over 2103 (over 50 hour MA) there is a likely serious bull break, and on a close over 2103 (clear close over 50 day MA), there is a confirmed serious bull break. I'm leaning short until we see those bull breaks, and watching the 69% bearish rising wedge from the current retracement lows. SPX 5min chart:

From a trendline perspective I have my eye on a possible falling channel with currently theoretical channel resistance just under the 50 hour MA. A reversal there would be bearish, a break above not so much. SPX 60min chart:
Bulls and bears are both on must perform at an inflection point test that is more serious than I was expecting. The Fed meeting today could obviously be a big market mover. Stan's bull/bear line today is a bit higher than mine at 2102.5 ES, effectively over the 61.8% fib retrace of the move from 2132.82, with an SPX equivalent number at about 2107.5. I would already be leaning bullish by then. You can see Stan's Wednesday morning premarket video at theartofchart.net here, and if you want to see those on Mondays, Wednesdays and Fridays you should follow the blog to get an email as soon as they are published.

Tuesday, 28 July 2015

Bounce to Retest Daily Mid Band

SPX made the first of my remaining three downside targets near the open yesterday when it broke below the H&S target at 2072. The remaining targets are the falling wedge target at 2060 and the weekly lower band, now at 2057.

I was talking about a likely bounce coming soon yesterday morning and a double bottom formed yesterday that should be for that bounce. The target is a 61.8% retracement of the falling channel from the H&S right shoulder. I posted the chart below on twitter last night and hopefully many of you saw that (my twitter handle is shjackcharts). Looking at the overnight action that seems likely to make target today. SPX 5min chart:
I'm expecting strong resistance at that 2088/9 target, which is also the level to retest the daily middle band. We might see a little higher intraday but it shouldn't be much. SPX daily chart:
I have to be out for the first couple of hours today so I'm hoping that test won't be while I'm out, though it may well be. After the test I'm expecting that SPX will reverse back down to make lower lows, and the primary scenario Stan and I are running here is that we will see a swing low form at or above range support 2039-44 in the next couple of days before a rally back to range highs. The bears could surprise us however and break range support instead, which would deliver a double top target at 1954. We'll be watching closely as this develops.

Stan and I did a webinar on Sunday looking at SPX, oil, gas, precious metals, bonds, sugar and some other instruments. If you want to see what we're thinking on these you can watch the video at our joint site theartofchart.net here. We'll be doing these for the next few Sundays free to all.

Monday, 27 July 2015

Looking For a Bounce Soon

Generally speaking after a trend day on Friday we would be looking for some consolidation / retracement today. ES was weak overnight and is gapping under Friday's low. The immediate target area is 2072 (H&S target) to 2060 (falling wedge target) and I am expecting both of those targets to be made early this week, though the lower target may not be hit today. I have strong positive divergence on the 15min chart and a buy signal on the 5min chart. SPX 5min chart:
 I was talking on Friday morning about the possibility that a hard down day on Friday might deliver a candle that reversed the previous week's bullish break over the middle band. That reversal candle fixed at Friday's close and that opens up a touch of the weekly lower band at 2054 as a high probability target for this week as well. We could see a lower band ride down if SPX can break strong range support at 2039. If so the double top target would be 1954. SPX weekly chart:
I'm looking for a buyable dip in the first 90 minutes today into a decent bounce, then most likely lower.

Friday, 24 July 2015

Testing The Weekly Middle Band

I gave three topping options for SPX yesterday morning. The break below 2110 eliminated the first, but the action yesterday afternoon added another option, so there are still three options this morning, which I'll list in the order of likelihood as I see it.

The first is that SPX is forming a slightly downsloping H&S, and that we should see a bounce with an ideal target in the 2114/5 area this morning before a break down towards a target in the 2065-70 area. The bounce would be a 50% retrace of the falling wedge from the high and would stay under important resistance at the 50 hour MA in the 2117 area.

The second is that the H&S has already formed, albeit with an undersized right shoulder, and has broken down with a target in the 2072 area. I would discard this option on any move over the right shoulder high at 2108.29.

The third, which becomes much more likely on an hourly close over 2119, is for a retest of the highs to make the second high of a double top. There is an obvious risk with this option that there is a bullish breakout, though a marginal new high or even all time high wouldn't damage the bear case in my view.

Whatever happens here the bears have a strong statistical edge to go lower on the basis of the triangle that broke up last week. As I said at the time, after the thrust up from the triangle was complete, there was an is a 90% chance of a full retrace of that thrust. There are two possible ways to draw the triangle that would give targets in either the 2083 (Stan's preference I think) or 2067 (my preference) areas, but either way that retracement has not yet made target. SPX 15min chart:
If options 1 or 2 play out then we could see a decent move down today. That would fit with stats for Fridays of late, with six of the last eight closing red, though the two that closed green were in the last two weeks, and given that the lows yesterday were testing the weekly middle band, it opens up the real possibility that the fairly bullish breakout weekly candle last week breaking back over the weekly middle band may be negated by a very bearish weekly candle this week breaking back below it. I'll be watching the close with great interest today. SPX weekly chart:
Stan and I will be doing our first interactive 'Chart Chat' webinar for followers at theartofchart.net on Sunday. This will be open to all for the first few weeks and you can watch Stan & I updating our projections for equities, bonds, oil & gas, USD, precious metals and other tradable instruments for the coming weeks there. It should last about an hour and anyone who trades any of these instruments and/or enjoys high level TA should come and watch. We have been doing these webinars since last October exclusively for members at Princeton Trader and, false modesty aside, have made a lot of excellent calls and quite a few amazing calls over the period. You can see Stan's post about the webinar and a short video showing some of those calls here. Everyone have a great weekend :-)

Thursday, 23 July 2015

Topping Pattern Options

Back on the morning of Tuesday 7th July I drew the arrows below on the SPX daily chart as a possible path for the strong rally I thought we were likely to see in the near future. The rally went a little higher than I expected, but so far that has been a pretty decent guide for the market action since then. Have we therefore now seen a significant high? Maybe, but we'll need to see whether bears can break back down below 2044 to trigger the double top target in the 1954 area. In the short term I'm looking for a topping pattern here to take SPX lower to an area from where we might see that double top support test. SPX daily chart:
How's the chart I posted yesterday looking? Well SPX broke below the 50 hour MA yesterday and established a short term floor at 2110. If that holds then I'll be looking for a retest of the highs before another leg down towards the 2086-8 area on a break back below 2110.

Stan & I have been looking at SPX this morning and the path we think would be more likely is a test of the 38.2% fib retrace area (and possible H&S neckline) at 2101/2, then a rally to an ideal high in the 2114/5 area (that may well also retest broken channel support), then a break back below the H&S neckline with a target in the 2070 area (near the 76.4% fib retrace).

There is a third option where the 2101/2 area is hit and then the highs area retested and if we see that then the chances that we see a bullish breakout at the highs would be highest. SPX 60min chart:
I'm trying to answer tweets during the day but I'm only really checking the markets before the open and often don't have an internet connection here. I'm just running a few swing trades this week which are short ES from 2118 (2125 SPX), short DX from 98.2, and I just added long CL from 49.35. The DX and CL trades have been covered in Stan's videos posted on theartofchart.net. Stan and I are running open (to all) webinars looking at various markets including equities, oil, forex, precious metals on the next few Sundays and you can sign up for the first one on Sunday afternoon at theartofchart.net.

Wednesday, 22 July 2015

Retest Likely Soon

SPX is finally retracing from a rising wedge from the last lows. I'm not expecting a huge move here as this looks more like the first move down to establish short term double top support. SPX looks likely to gap under 50 hour MA support at 2115 and there is then strong support in the 2099 to 2103 area. Both the 38.2% fib retracement and very attractive looking possible rising channel support (blue dotted trendline) are currently in that area and we might well see that tested in the morning before a strong rally. SPX 60min chart:
My internet connection here is less than ideal but usable. I'll be trying to post an SPX chart before the open tomorrow and Friday.

Friday, 17 July 2015

July Opex

Another day of grinding up yesterday and it's possible that we'll see the same today, though Dow has been down nine of the last fourteen July Opexes and SPX has been down six of the last seven Fridays (stats courtesy of the Stock Trader's Almanac and Cobra's Market View). If not today, then the historical stats for Monday are bullish and the stats for Tuesday and Wednesday next week are bearish.

The optic run charts are now more clearly bearish than they were yesterday. There are now well established resistance trendlines on SPX, INDU and TRAN, and I have sketched in possible channel support trendlines for the coming retrace, if we are seeing channels form rather than wedges or megaphones. Scan 3x 15min SPX INDU TRAN charts:
I have a decent looking rising wedge on NDX, nothing worth mentioning on RUT except a possible double top forming & not much reliable on NYA. All indices except TRAN have made their double bottom targets and made their buy signals targets. All indices except NDX have possible 60min and/or daily RSI 5 sell signals brewing. Scan 3x 15min NDX RUT NYA charts:
We should find out today whether we are going to see a retracement/reversal from yesterday's highs or are going to push up into a full retest of the all time high at 2134.72. On a move over the last significant high at 2129.87 I'll be looking for that full retest.

I'm on holiday next week but I'll be trying to post at least one chart every morning with comments. Stan will be posting his usual Monday, Wednesday and Friday video updates at theartofchart.net and I'd suggest looking at those too. If you follow the blog then you will receive posts there by email within minutes of them being posted. Stan's post there today is well worth a look and you can see that here. everyone have a great weekend :-)

Thursday, 16 July 2015

Inflection Point Test

On Tuesday last week I put forward a favored scenario for a strong rally that would make a high in the 2115-20 area. The following day I noted the strong daily buy signal that had fixed, and on the Thursday I called the double bottom with a target at 2123. Looking at ES that 2123 target may be made at or near the open today.

Quite a few of you will have read those posts as SPX was testing the 2040s, and those of you that didn't think that I was having bullish delusions most likely thought that was a credible bearish scenario. Fast forward to today and almost everyone is seeing this as a bullish breakout that will likely result in new highs. That was always a possibility of course, but has anything actually changed in the interim apart from the big rally that I predicted having now happened? I drew the arrows on the daily chart below on Wednesday last week and as you can see, SPX is pretty much where I was expecting then. SPX daily chart:
Looking at my optic run indices they are ambiguous about a big fail here, which does improve the chances that the high will be retested. Most of them were also showing clear flaglike setups after the retracement yesterday afternoon so the gap up today isn't unexpected. Scan 3x 15min SPX INDU TRAN charts:
Scan 3x 15min NDX RUT NYA charts:
What are the odds of rejection/breakout here? Well any higher high 30 minutes after the open will set up a 60min RSI 14 sell signal that would then fix on a decent move down. That's just as well as the 60min RSI 5 and 15min sell signals that I mentioned yesterday morning both made target at the afternoon low. The pattern setup across the optic run indices leans short, but not with great conviction. The strongest card the bears have here is the triangle thrust retrace stat at 90% odds that we see a retrace to at least the 2080-5 area, but we do need to remember that the odds of not doing that are still 10%.

The three most likely scenarios here are, in my view at least are:

  1. Rejection at the double bottom target area 2118-27. Bearish H&S scenario. 
  2. Rejection at a retest of the all time high 2134.72, with the daily and weekly upper bands strong resistance at 2136/7. Bearish double top scenario. 
  3. Break up towards the monthly upper band 2178 area. Bullish breakout into September, still part of overall topping scenario. 
I'm favoring the first then second options, but the odds of the third option will rise a lot if bears can't get rejection from these levels today or tomorrow. I'm not concerned about the increasingly universal assumption that this will break out, that's just recency bias. People were expecting a bearish breakout last week for the same reason. The odds of a bullish breakout here have increased slightly since I laid out this rally scenario nine days ago, but not by a lot. As always, time will tell. 

I posted a chart yesterday on theartofchart.net forecasting a major inflection point test on USD in the 97.7 to 97.8 area. USD is testing that level now and while Stan and I are looking for rejection and a move to the 90/1 area, it may go the other way towards new highs. Watching with interest. USD daily chart (from yesterday):
Some of you may be wondering why Stan and I went with Wordpress rather than Blogger for theartofchart.net. The reason is that any blog followers on Blogger receive posts by email after a few hours, on Wordpress they receive them within a couple of minutes. If you want to see these updates by email follow there and you will get those as soon as they are published. 

Wednesday, 15 July 2015

The Triangle Issue

The move up this week hasn't gone quite as I expected. As I said on Monday morning, there were and are 90% odds that the triangle that broke up on Friday would make a thrust out that would be fully retraced within days back to, depending on the draw, at least the 2080-5 area. I was expecting that retrace on Monday or yesterday, to be followed by another move up, but it hasn't happened yet.

There is obviously a 10% chance that the triangle retrace won't happen of course, but 90% odds are really pretty high so I'm assuming that we will see that retracement until demonstrated otherwise.

On the daily chart, the RSI5_NYMO buy signal made target yesterday and if we are to see a retracement then the obvious target is a retest of the daily middle band in the 2090 area. On a bull scenario we would go through that intraday and close the day back over it. On the bear scenario SPX would close back under the middle band, and not come back anytime soon. SPX daily chart:
The 60min (RSI 14) buy signal also made target yesterday, and some weakness this morning would fix a 60min RSI 5 sell signal. SPX 60min chart:
On the 15min chart the thrust up from the triangle appears to be topping out or to have topped out, and there is a very clear 15min sell signal. On the optic run charts I showed yesterday all of them had broken rising support by the end of the day, and NDX and RUT had both also made their double bottom targets, though SPX and Dow were both still short of theirs and TRAN looked very unlikely to make the one there. SPX 15min chart:
I'm looking for a consolidation or retracement day today and if a retrace gets going then I'll be looking for a move to the 2080-5 area. A hard support fail there that lasted into the close would be very bearish. a hold of the daily middle band at the close would be cautiously bullish, though bulls need to make a new all time high to open up higher targets.

This is an inflection point, and my lean is towards a bearish resolution. There's a lot of talk that a new move up is starting and that might be right, though there is still very strong resistance in the 2200 area that is very unlikely to break whatever happens here. The truth is though that so far this week anything unexpected has been in the finer details, and there has been no major deviation from the roadmap to a retest of 2120 that I laid out on the morning of Tuesday 7th July. The arrows I drew for that scenario are on the daily (first) chart in this post and I haven't moved those arrows since. That was an overall bearish scenario.

Tuesday, 14 July 2015

Optic Run

Today I've done an optic run of the 15min charts of the main US indices to get an idea of how the next few days are likely to develop. I've discarded the smaller SPX double bottom that I've been showing as a possibility, and the bottom line is that of the six double bottoms on these six indices, not one has yet made target. Given that SPX, Dow and NDX have already broken the 61.8% fib retracements the obvious conclusion is that the falling wedges that broke up on five of the six indices below are full reversal falling wedges, with targets at lower lows from the previous highs or tests of those highs.

The SPX double bottom target is 2123 is a good fit with that scenario. Neither of the daily RSI5_NYMO or 60min buy signals are close to making target yet, so that backs up a scenario where the short term high is not imminent. Scan 3x 15min SPX INDU TRAN charts:
Scan 3x 15min NDX RUT NYA charts:
The 50 DMA held the SPX high yesterday and it may well be that we are going to fail into a retracement before going higher. I have support for that retracement at the daily middle band, currently at 2088, and very strong support further down at the 50 hour MA and 5 DMA, both currently at 2071. I've drawn in a possible channel support trendline on the SPX chart.

Monday, 13 July 2015

Tantalus Ate My Lunch

I was hoping that we would see much or all of the move to the triangle target on Friday as otherwise I feared that SPX would gap up into the target on Greek news. Annoyingly that's what happened so the Greeks ate my lunch again.

Is the Greek negotiation saga finally over? Well maybe. The deal struck however is harsher than the one rejected by the Greeks in their referendum two weeks ago, and it remains to be seen whether Tsipras can sell it back home.

Is this a good deal for the Greeks? Not as far as I can see. As far as I am aware almost all the money will go to paying interest and rolling over existing debt. The Greek economy will continue to be sacrificed on the Euro altar, when the truth is that the best way for Greeks to start on the road back to prosperity is to default on the huge debts that they can never hope to repay, leave the Euro and make a new start outside the Euro straitjacket. In the meantime Greece is like the ancient Greek mythological villain Tantalus (possibly the inspiration for the fictional Dr Hannibal Lecter), who was damned in Tartarus to be in eternally close proximity to food and drink that he could never reach.
On SPX the triangle target was made at the open, and the larger falling wedge that broke up on Friday has now retraced 61.8% of the falling wedge move. The key resistance zone that I was looking at on Friday morning runs from the daily middle band at 2088 to the 50 DMA at 2099, and the HOD at the time of writing is at 2097.87. This could be the high or close to the high of the current move, and when this thrust up ends we should see shortly afterwards a full retrace of this thrust back into the 2075-80 area. SPX 15min chart:
Regardless of whether we see that retrace of the thrust out of the triangle however, this move up may well not be close to finished. Neither the daily RSI5_NYMO sell signal nor the hourly buy signal have yet made target and I'd generally expect these to. If bulls can recapture the 50 DMA then the smaller double bottom target at 2103 and the larger double bottom target at 2123 come into view. SPX daily chart:
I'm expecting a return to retest Friday's close at 2076.62, most likely today or tomorrow. If that move happens before the 60min and daily buy signals make target (at the 70 levels on their respective RSI 14s), then I'd expect another push up afterwards into either the 2103 or 2123 targets.

Friday, 10 July 2015

Not Quite Groundhog Day

Well this is all looking familiar. Yesterday closed down hard after a day of relentless selling with a close just under the 200 DMA, and SPX is looking set up to gap up big overnight. Is it Groundhog Day? No, I don't think so, though the similarity is certainly very striking. At the end of the day though yesterday was just a very odd looking inside day, with no break either of Wednesday's high or low, SPX daily chart:
The inside day is part of a triangle which it is now obvious that SPX has been forming for much of the week. This means that the double bottom that I was looking at yesterday morning is still in play, but there are now two other pattern targets lower, both of which are higher probability. I'm expecting a break up and the targets for that are on the chart. In the less likely event (IMO) of a break down, then the triangle target would be in the 2015 area, which is a match with the H&S target I posted last week. After the thrust out of the triangle there is then a better than 90% probability (Stan's stat) that the thrust will then be fully retraced in the next few days, which favors a fail at one of the 2093 or 2103 targets, in effect either a fail at the daily middle band of the 50 DMA. SPX 15min chart:
I don't much care for triangles and have said so here many times. Stan has been showing me his take on triangles for the last few months so though, and I have now found triangles of the kind where the triangle is mirrored on the RSI 14 to be a reliable pattern for trading. This is one of those. Any false break out from this triangle should be obvious as the triangle on RSI shouldn't break with it. When there is a confirmed break in either direction I will tweet the confirmation soon after, though in practical terms any break above yesterday's high at 2074.28 in trading hours will strongly favor an upward resolution.

I'll be doing at least one post at theartofchart.net today. I'll be doing an update post on URA and may do a second if I have time. Everyone have a great weekend :-)

Thursday, 9 July 2015

Schrodinger's Pumpkin

I posted a chart on twitter last night showing the falling megaphone that formed during the day and the triangle that formed and broke down near the close. What happens to a short term pattern like this overnight? Well that rather depends on where the open is the next day. If there is no gap then the pattern will often play out as though it had never been interrupted. If the market gaps away hard then the pattern becomes irrelevant.

Back in the old days you'd have to wait until the open to find out whether the pattern was a fine carriage or just a pumpkin, but nowadays the futures can tell us which is more likely and this triangle, sad to say, is going to be a pumpkin.

That leaves us with the 79% bullish falling megaphone, with a likely gap up over megaphone resistance and with ES at 2061.5 at the time of writing, possibly having made the full pattern target in the 2068 SPX area as well. SPX 1min chart:
So where does that leave SPX this morning? Well I was saying near the lows yesterday that I was expecting the move to make the second low of a double bottom that would target the 2123 area on a break back over 2084.  That scenario's obviously still looking pretty good this morning and the next step would be for bulls to test double bottom (and range) resistance in the 2083-5 area and see if they can break it. We may in any case see a bounce off that level at the first test today unless this is a gap and go trend up day. SPX 60min chart:
Given the strong daily and 60min buy signals here I'm expecting the 2083-5 area to be broken, though not necessarily today, and after that break the target is the 2119-23 area, either to form the right shoulder on the still theoretical H&S that I've been looking at since Tuesday morning, or possibly to retest the all time high. SPX daily chart:
I'm looking for a reversal back down at the first test of the 2083-5 area today, but if we are going to gap up into a trend up day today then it might break at the first test. On a reversal from there the 2059 level would be the level at which I'd be getting concerned about a full reversal into yesterday's low, same level as yesterday. We are still in a headline minefield so trade safe.

Wednesday, 8 July 2015

Daily RSI5_NYMO Buy Signal Fixed

For me yesterday was possibly the most fun day of the year so far, and had the low of the day just continued down another three ticks on ES to test the globex low at the open on Sunday, would have come close to perfection, as I had a buy order there. It seems fairly obvious, Greece headlines permitting, that SPX is going with my preferred option that I laid out before the open yesterday and both the daily RSI 5 buy signal, and the strengthened 60min buy signal, that I was talking about as possibilities in that post had fixed by the close yesterday.

ES fell hard overnight but the rising wedge that formed from the lows yesterday was obviously topping out by the end of the day. I'm looking for a retrace into one of the main fib retrace targets which are the 38.2% fib at 2068.57, the 50% fib at 2063.88 and the 61.8% fib at 2059.19. On a move significantly below 2059.19 I would be wondering about a possible full test of yesterday's low. SPX 1min chart:
I was looking for the stronger 60min buy signal and daily RSI 5 buy signal but what surprised me somewhat was that there was also a NYMO buy signal, delivering a very strong daily RSI 5_NYMO buy signal. I've talked about these before and these are very reliable signals indeed. No signal is perfect though and the biggest fail in recent years was the one of these that fixed in the powerful rally in early October last year the day before the main decline into the October low started. We do therefore need to see some follow through to confirm this signal, but it's a strong indication that SPX may indeed make the rally into 2119 that I was talking about yesterday morning. SPX daily chart
Subject to unexpected gusts of strong wind from Europe today I'm looking for some retracement of yesterday's move before another move up. I have main resistance in the 2095-2105 area and a break above opens my ideal target at 2119. On the downside a break below yesterday's low would be a bad sign for bulls and ideally they should hold 2059 today.

Tuesday, 7 July 2015

A Flat Earth Society of Greeks

Well the Greeks called the EU's bluff at the weekend, and after all the tough talk last week it appears that either the EU was bluffing about forcing a grexit, or they're planning to just ignore the vote and try to agree a deal much along the lines of the one that the Greeks just rejected.

There are some great collective nouns out there such as a murder of crows and a pantheon of gods, but as far as I am aware there is as yet no collective noun for a group of EU ministers. This is an obvious gap to be filled and my suggestion for this is a 'shambles of EU ministers'. No doubt this will catch on.

Leaving aside the constant eruptions of wind coming from Europe I've been looking hard at the SPX chart and it seems obvious that a decent rally is coming soon. This would mean that the current H&S that I have marked up on SPX would most likely not be the final topping pattern, and if so, then I have a suggestion that would be a significant technical upgrade.

On the 60min chart I have left the current H&S pattern marked on it and the possible H&S pattern that has formed with a target in the 2114 area on a break over 2085. If we see that break over 2085 before making a new retracement low then I'd be taking that seriously, given that SPX would already have broken over the 50 hour MA in the 2083 area. SPX 60min chart:
That would be one option for a larger H&S here, but the other (and my preferred) option would involve a new retracement low testing and holding the 2039 area. If so that would set up a right shoulder bounce with an ideal high in the 2115-20 area with a possible fail under the 50 DMA in the 2100 area. I like this scenario a lot and if we should see a test of the 2039 area with a decent bounce that should set up a stronger 60min buy signal, a possible daily RSI 5 buy signal and a very nice topping pattern with an obvious target at the 61.8% fib retrace of the rising wedge from the October low. We'll see how that goes. SPX daily chart:
My post is late this morning as I needed to take my older son to the dentist this morning among other things, and SPX has been racing ahead of my writing this. At the current LOD at 2055.19 there are now daily RSI 5 and 15min buy signals brewing and the 60min buy signal is still fixed with divergence getting stronger. This would be an acceptable (though high) low on my second scenario above, though I'd prefer a low much closer to the 2039 area. Either way there is most likely a strong rally coming soon.

Monday, 6 July 2015

Looking for the Grexit

The Greek referendum was a clear vote against further austerity and we should see this week whether the ECB bluff that the Greeks have called is in fact a bluff. I suspect it isn't and that a grexit is now the most likely outcome. If so then I think that's great news for the Greeks, who  can finally default and start rebuilding. It's a rare country that still has a shrinking economy a couple of years after default. If that's the way it goes then it would nice for that to be quick, as the constant headlines have become a serious bore.

SPX hasn't been generous with trendlines since the last high. I do now have a three touch resistance trendline established on Thursday and I'll be watching to see whether that survives the day. As long as it survives my lean is bearish. SPX 15min chart:
SPX broke the weekly middle band on a closing basis last week and that was a serious support break that I'm expecting to deliver a lot more downside. Confirmation that a serious correction has started also needs a break below rising channel support from the November 2012 low, and that is currently in the 2000-10 area. Important levels to watch today are the daily lower  band at 2058, the weekly lower band at 2055, the 200 DMA also at 2055 and the 50 week MA at 2044. On a break below the 2039 low I would then have no serious support above channel support at 2000-10. SPX weekly chart:
There is a very nice bull setup here on EURUSD, and it's sufficiently nice that I'm wondering whether the reaction to a grexit on EURUSD might actually be a large rally. Watching with interest. EURUSD daily chart:
I'm leaning short but am being very cautious as this is still a headline minefield. Hopefully the Greeks can now default as they should have done years ago, and that may calm the news down. In the meantime trade safe.

Thursday, 2 July 2015

The Long Kiss Goodnight

Well that was an unusual day yesterday, with the tape buffeted on and off all day by news. Statistically July 1st is the most consistently bullish day of the year, but the bears dominated the day, but without managing to negate the double bottom setup and conceding a strong close to the bulls.

The constant news bombs reminded me powerfully of 2011 when the news was also mostly about the same mess in Greece of course. If an agreement can be put together this time as well to keep the Greeks in the Euro for the moment, then perhaps we can look forward to the same again in two or three years. Who can say?

The main thing that the bears failed to manage yesterday was to test the daily lower band at 2060, and that being the case, there is now a possible target at a retest of the daily middle band at 2096. With the double bottom target at 2092/3, and open 60min and 15min buy signals, that means there is a credible setup here for a big rally to those levels today or Monday, with the caveat that the stats for today are almost as bearish as yesterday's stats were bullish. SPX daily chart:
The important support level to watch today is rising support from the lows at 2071. A break below would weaken the rally case here and open up a test of the daily lower band, and a test of that would resume the daily lower band ride. Above there is declining resistance from the highs in the 2081/2 area, and a break over that would open up the double bottom target at 2092/3 and the daily middle band at 2096. SPX 15min chart:
Hard to say what volume will be like today going into the holiday weekend, and as ever this week, watch out for news bombs. Everyone have a great weekend. :-)

Wednesday, 1 July 2015

Greek News Rollercoaster

More greek news overnight and at the moment SPX is trying to gap up 18 handles or so. Where the open is exactly today is very important as SPX retested and failed twice at the broken H&S neckline yesterday. If we see a gap up over that level at the open this could well be a gap up over resistance, and as long as 2073/4 is then respected as support then SPX is is free to play out the double bottom that with the opening break will have triggered with a target in the 2093 area, with declining resistance from the high currently in the 2092 area.

There is a strong resistance zone 2095-2105 and this rally  could get SPX close to the bottom of that zone. SPX 60min chart:
The SPX daily middle band is currently at 2098, near the middle of the 2095-2105 resistance zone. The daily lower band is currently at 2062 and would need a test today if the lower band ride down is to continue. SPX daily chart:
I have the SPX on a 60min buy signal here and a strong rally on a gap over resistance today looks very credible, subject to more news of whatever type about the greeks. As long as 2073/4 holds as support then I would be looking for a move to 2090-5 and a possible test of the 2095-2105 resistance zone. If 2073/4 doesn't hold as support this rally may well just fade away as suddenly as it has appeared. An announcement that the greeks have cancelled the referendum could spike the market up hard. A credible announcement that the referendum will be proceeding regardless may spike the market down hard.