- 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.

Wednesday 30 September 2015

Mind The Gap

SPX falling channel support held again yesterday and that has delivered a strong bounce from the trendline that would normally follow. We are now at an interesting stage where at the close last there were fixed buy signals on both of the SPX 60min RSI 14 and 5, and also on the 15min RSI 14 and 5.

So have we made the low for the current move down? Most likely not, or at least it would be a funny looking low. Stan and I are thinking sideways consolidation before the low is made and I'm looking for much or all of this impressive gap up on SPX to be given back by the end of the day. Channel resistance on SPX is in the 1925 area and I have that falling at about 12-4 handles per day. I think that is more likely to be hit tomorrow than today, though I could be mistaken.

Most of the indices are showing decent patterns from the FOMC high, with the exception of TRAN which is showing a perfect broken and retested declining resistance trendline: Scan 3x 15min SPX INDU TRAN charts:
Scan 3x 15min NDX RUT NYA charts:
Bulls do have a shot at breaking this up today, but they'd have a better shot tomorrow. The last day in September has been negative six of the last seven years, and the last day of the month has been down nine of the last ten months. If bulls fail here then this big opening gap has a very good chance of being filled by the close.

Tuesday 29 September 2015

All About That Channel

I was sorting out an issue with my sons' school this morning so today's post is both later and shorter than usual. Fortunately the setup really doesn't get much easier than the choice the market needs to make this morning.

The low yesterday was at the falling channel support I posted yesterday morning, and the low this morning retested that a little lower. So far that channel support has held. If it continues to hold then I currently have falling channel resistance in the 1937/8 area, not far below the daily middle band at 1946. That's a nice looking target area. The open 15min RSI 14 and RSI 5 signals support this rally scenario.

If the falling channel breaks down then the downside targets open up, and the path to a retest of the 1820 low opens up three to four days earlier than it would if SPX was to retest it within the falling channel. SPX 15min chart:
Today is the other cycle trend day this week so there are 70% odds that today will be dominated by either buyers or seller. Whichever way this breaks it may be fast and hard.

Monday 28 September 2015

Panic Low Retest Coming

It has been a choppy few weeks, but on the weekly chart the whole period has been part of a weekly lower band ride that is now starting week 8. The weekly lower band closed last week at 1918 and SPX looks likely to open close to it. The weekly 3SD lower band closed last week at 1849 and Stan and I are thinking we could see that level tested and possibly lower this week. SPX weekly chart:
In terms of the pattern structure here the overall decline is within a falling channel with channel resistance in the 1995 area and channel support in the 1770 area. A lot of these channels evolve into falling wedges, so we may well not see a test of channel support on this current move.

Shorter term Thursday's falling wedge broke up, retraced 38.2%, and established a falling channel from the 2020 high. As long as that channel holds today the next obvious target is channel support in the 1890 area (and falling at 10 handles per day). Channel resistance is currently in the 1945-50 area.  SPX 60min chart:
I'm looking for an AM high that fails again today. Stan has this as a cycle trend day today and that means that the odds are 70% that one side or the other will dominate the day. That would not necessarily be a full trend day though.

Friday 25 September 2015


I'm feeling much improved today, which is a great relief as I've really been feeling under the weather for almost the last two weeks. I'm expecting to have thrown this off entirely by Monday :-)

Stan and I did a free webinar looking at bollinger bands and RSI yesterday. The hour ran out quickly and we'll be following it up soon to add what we didn't have time to talk about yesterday. If you're interested you can see the recording of that webinar here, and much of what we are talking about on RSI you cannot see anywhere else, as Stan and I have developed or strongly refined ourselves most of the methods we are looking at. We also had some things to say about trends and TA that you will find interesting if you are at all interested in TA.

SPX bounced in the area that Stan and I identified in the morning, the expanded falling wedge I was looking for formed and then broke up, and at the time of writing SPX has retraced almost 38.2% of the move from 2020 to 1908. I'm favoring a bit higher before a failure into a lower low under yesterday's low, and the important resistance levels today for me are as follows:

  1. 1945 - 5 day MA (daily closing resistance)
  2. 1949 - Last significant high
  3. 1952 - 38.2% fib retracement
  4. 1956 - Daily middle band (daily closing resistance)
  5. 1960 - 50 hour MA
  6. 1965 - 50% fib retracement
  7. 1971 - 100 week MA
  8. 1978 - 61.8% fib retracement
  9. 2000 - Main falling channel resistance

Somewhere in the 1949-78 range I'm looking for a reversal into a move that should then test the 1867 low on SPX and most likely break it. SPX 60min chart:
Is the opening high going to hold today? Very possibly as that was a perfect retest of broken rising support on ES from yesterday's low. I would ideally like to see a retest of the globex high in the 1960 (SPX) area this morning but that may not happen. ES 5min chart:
TGIF! Everyone have a great weekend :-)

Thursday 24 September 2015

The Bear Is Strong In This One

SPX only made the 23.6% fib retracement of the falling wedge that broke up yesterday, forming a bear pennant/triangle from the falling wedge low that has broken down this morning. This kind of retracement is indicative of a strong trending move and suggests also that the falling wedge is evolving into a larger pattern, which I am cautiously assuming is a larger falling wedge.

If so then falling wedge is in the 1907 area at the time of writing, and declining at about 14 handles per day. If hit this morning that would coincide with decent support in the 1903-11 range and we might well see a strong bounce there.

Longer term the full bear pennant target is in the 1860 area, which is a good fit with a retest of the panic low at 1867. Bigger picture falling channel support is currently in the 1780 area, and that may be the ultimate target for this move. SPX 60min chart:
The daily lower band is at 1910 now, which again is a decent fit currently with possible falling wedge support and the 1903-11 support range.  If we see that this morning I'll be looking for support in that area and, if found, then a rally before continuation lower.

Wednesday 23 September 2015

Falling Wedges Testing Resistance

I posted short term falling wedges on twitter last night, and these are 68% bullish of course. On the 68% bull option I'd be looking for a retest either of the daily middle band in the 1955 area, or on a break above that I'd be looking for a retest of broken rising wedge support, the 50 hour MA, and the 5 day MA, all in the 1969/70 area. SPX 60min chart:
The daily middle band at 1955 should be strong resistance today, but that is daily closing resistance. A pinocchio through it intraday would be fine as long as the close is back under or at the middle band. SPX daily chart:
In the very short term I have pretty clear bull & bear setups here on the 1min chart. The bull setup is a break up towards 1963 area which is the 38.2% fib retrace area for the falling wedge and midway between the obvious 1955 and 1970 resistance areas. The bear setup is a fail here and the falling wedge takes the 32% option breaking down towards a target in the 1820 area. If we go with the bear scenario then the first sign will be a break of the rising support from yesterday's low in the 1930 area. SPX 1min chart:
I'm leaning towards further rally today with the obvious target in either the 1955 or 1970 area. At the time of writing the IHS on the SPX 1min chart is starting to break up, so this should either fail hard here, or keep going to one of those targets.

The post is a bit late today. I'm feeling improved but still wading through treacle if you know what I mean. On the mend though.

Tuesday 22 September 2015

Going Down

Apologies for the missing and late update so far this week. The bug I caught last week is taking longer to shift than I expected. Hopefully it should be gone by the end of the week.

So where are we up to on SPX here? Well the big gap down this morning has taken out daily middle band support, and the small flag I posted yesterday has broken down with a target in the 1912 area. I've drawn in the likely H&S patterns that have formed on SPX, Dow and TRAN and if these are right then all of these are on their way to retest the panic lows. I have drawn in possible alternate necklines on a bounce from the AM low today, but I'm not expecting right shoulders to form on those. Just a possibility to consider. Scan 3x 15min SPX INDU TRAN charts:
On the bigger picture the Fed high has established a perfect falling channel from the highs and now that SPX daily middle band support has broken the way is clear to retest the 1867 low. As long as this channel holds SPX may go a lot lower. The rising wedge that has formed over the last few weeks is a bear flag on the bigger picture, and the flag has two alternate targets. The first target is a retest of 1867 or a marginal new low. That option would generally make the second low of a double bottom that would in this case then target a retest of the all time highs. The more likely option in my view is the second option, with this move being a rough match with the flagpole move. That would give a target in the 1784 area, though as I said, these flag targets are rough targets. SPX daily chart:
I'm looking for a strong move down here. Yesterday's flag target is at 1912, the daily lower band is in the 1895-1900 area, the retest of the panic low is at 1867, and the monthly lower band is in the 1840 area. In the event we see a bounce here the daily middle band at 1954 should now be strong resistance,

Friday 18 September 2015

Fed Shocks World

A few minutes after the close yesterday I tweeted an H&S target in the 1953 SPX area on a sustained break under 1986. With the large gap under the H&S neckline overnight, that's a target worth remembering today.

The market has now had a few hours to digest yesterday's revelation that the Fed is still as fearfully timid about even a slight push on the economic brakes as it is recklessly bold at flooring the accelerator at the slightest sign of trouble. Having climbed back onto my chair after falling off it with the shock of the announcement that the Fed is still too scared to raise rates by even 0.25% six years into this 'recovery', I've been looking at the impact of this momentous news on the pattern structures on the equity indices.

The good news for bears is that the setup is now a lot more obviously bearish. Both of the ascending triangles on SPX and Dow have evolved into decent rising wedges, the rising wedge on RUT has evolved into a bigger rising wedge, and TRAN may have too, although it might just be a bearish overthrow of yesterday's rising wedge. With no clear pattern on NDX (but a clear rising wedge on NQ), and an unchanged symmetrical triangle on NYA, this is now clearly leaning bearish. Scan 3x 15min SPX INDU TRAN charts:
Scan 3x 15min NDX RUT NYA charts:
These rising wedges are 69% bearish and I'm expecting them to break down, the key question however is when? I have SPX rising wedge support in the 1956 area, and either before or after that trendline breaks, but at or over 1940-5, I'll be looking for a reversal pattern to form, and forming that pattern may well involve a retest of yesterday's highs.

It's worth remembering here that while the early bird may get the worm, it's the second mouse that gets the cheese, taking advantage of the death of the first mouse to try to eat the cheese in the mousetrap. Is this setup very likely to retest the 1867 low soon? Yes. Is it going to be a seriously painful experience shorting 1960 and then sitting through a retest into the 2020-30 area? Yes.  The chances are that we will see a better short entry than this in the next couple of trading days.

Thursday 17 September 2015

The Last Chicken in the Shop

My house is a house of disease this week. My wife caught a virus, then my daughter, and I wasn't feeling great yesterday though I was hoping that I was just tired. Today however there is no doubt that I have this virus too, and I'm feeling like a million (zimbabwean) dollars. I'll be fine in a day or two but in the meantime I'm just struggling through.

SPX had a solid day yesterday and confirmed the break over the daily middle band. That's now in the 1961 area and should be support. Ascending triangle resistance also broke on both SPX and Dow near the close. Does this mean that the bulls are good to go? Possibly, though as a buy setup this is still very unappealing, as you can see on the charts below.

So what's the setup on my optic run indices? Well as I said, the ascending triangles are breaking up on SPX and Dow, but these are triangles and therefore prone to false breaks. Bulkowski actually has a page looking just at busted ascending triangles and how those behave on up to three false breaks. You can see that here. These breaks may not be sustained.

There is one symmetrical triangle on NYA, and that has broken up too. The same reservations about triangles apply here too though.

On both RUT and TRAN there are clear rising wedges. These break down 69% of the time and both RUT and TRAN closed at wedge resistance. They could overthrow a bit here and that should be bearish. There is a 31% chance that they could break up with the triangles of course, but in that event we'd likely be looking at a move up on SPX and Dow that would retest the all time highs. I really don't think that's at all likely, and unlike the triangles, I find these bearish wedges that break up to be solid performers. A very good example is the target I called in June 2013 at 1965 SPX. Made target like a champ.

The last of my six optic run indices is NDX, and there is no clear pattern there, with possible options for both an ascending triangle or a rising wedge. On NQ however the pattern is very definitely a rising wedge, and again that closed at wedge resistance. Scan 3x 15min SPX INDU TRAN charts:
 Scan 3x 15min NDX RUT TRAN charts:
Out of these six optic run charts I therefore have three unreliable breaks up from triangles, and three rising wedges that were all testing resistance at the close yesterday. As long setups go, that is really scraping the bottom of the barrel for attractiveness, and while these indices can go a bit higher without the wedges breaking up with confidence, the odds still favor a fail sooner rather than later. With the Fed in the mix today as well this looks like a good day to take off. If you are trading this be very wary of a hard reversal. I'll be watching and will call any serious signs of reversal on SPX on twitter.

Stan and I are doing some free educational webinars over the next few weeks at theartofchart.net and the first one is tonight on the subject of trading in volatile markets. All are welcome and it's free if you want to come. The link to the page our free webinars over the next month is here.

Wednesday 16 September 2015

Bears Need Rejection

The bulls had an excellent day yesterday and broke back over the daily middle band. This opens up the upside on a further break over 1988-93 resistance, unless we see a rejection candle today that breaks back under the daily middle band. This would be a rejection candle and would normally reverse most or all of yesterday's breakout candle. The daily middle band is at 1960 at the start of today. SPX daily chart:
Is there a possible setup for retracement here? Yes, very much so. A rising wedge formed yesterday and broke down at the close. That's backed up by a 15min sell signal and sets up a retracement to the main fib retrace targets for the wedge which are in the 1970, 1966, and 1961 areas. I'm expecting to see that retracement and if SPX finds support at 1961 or above that holds today, then we see more upside and the full test of the 1988-93 area. If SPX drops under 1960 then I'd be looking for yesterday's daily candle to be mostly or fully retraced, and a close well under the daily middle band. SPX 1min chart:
This is almost the last chance saloon for the bears short term and and if there is no rejection candle today then we could well see the first fail on my 5DMA Three Day Rule stat since the start of 2007. As I have not looked further back than 2007 that would in fact be the first fail on this stat that I have ever seen. No stat is 100% though, and this one may mar its perfect record here unless bears can reverse this back down today.

Tuesday 15 September 2015

Significant Inflection Point Here

Just for a change of pace today I'm going to do my SPX post without any SPX charts, as I think I can get the point across better with Dow and ES charts today.

Just to clear up one issue I'm getting every morning before I start, I'll just say that I am still expecting a retest of 1911 before a break over 1988 on the basis of my 5DMA Three Day Rule. Could this be the first failure since the start of 2007 on that stat from dozens of examples? Yes, in the sense that every instance has a possibility of failure, but I'm not seeing any strong reason to expect failure in this instance as yet.

The best formed triangle from the panic low is on Dow, so I'll lead with that today. The Dow triangle was breaking down slightly at the close yesterday, but that's not unusual in a triangle and may not be significant. If Dow breaks down hard today then the triangle target will be in effect at a retest of the panic low. If Down breaks up through the (red dotted) declining resistance trendline from the pre-panic rally high, then I'd be looking for a likely test of triangle resistance. That trendline has pinocchioed slightly at the open this morning. INDU 60min chart:
On ES (SPX futures, add ten handles at the moment for rough SPX equivalent level), a smaller triangle has formed within the larger triangle and should break up or down today. A sustained break up through triangle resistance, currently at 1954 and the weekly pivot at 1951.2 should deliver a retest of the last highs in the 1980 area, and the retest of the last high at 1988 on SPX. A sustained break below triangle support at 1936 should deliver a retest of the last low at 1899, and the retest of the last low at 1911 on SPX. I need hardly say that I'm leaning towards seeing the retest of 1911 SPX next but this could go the the other way. My stat doesn't exclude a test of 1988, it excludes a break over that level. Anywhere up to that level is ok. ES 60min chart:
I'm expecting to see a break out of this inflection point level today, and am leaning 75%/25% towards that break being downwards. If this breaks up I'd be looking for likely failure at the retest of the last high at 1988 SPX.

Monday 14 September 2015

The Year of the Triangle

I have no great love for triangles, as I've mentioned a few times before, and this year has produced a bumper crop across the equity indices, which is tiresome. We've been kicking around in the current one for three weeks now, and as ever, it has been an annoying bore.

So where do we start this week? Well everyone seems convinced that SPX is going to break up to a retest in the 2020-40 area, and I'm still very doubtful about that for two main reasons:

1. My 5DMA stat requires a retest of the 1911 low before a break of the last 1988 low. Could the stat fail to deliver here? Yes, any historical stat can fail, but having seen dozens of these 5DMA Three Day Rule setups since the start of 2007 I have yet to see one fail, and I'm not seeing any compelling reason to think as yet that the first fail will be here. From an odds perspective, if fifty solo lemmings leap off a cliff and drown, then the working assumption for the fifty first lemming leaping off the cliff should be that it will drown too. That isn't destiny, that's just math. As ever there is a possibility that it could go the other way, but most likely it won't.

2. On the six equity index charts below I have three ascending triangles, two rising wedges, and one symmetrical triangle. What these patterns have in common is that the targets on a break up would not be in the 2020-40 SPX area or equivalent. The targets are all close to retests of the current 2015 highs, except for TRAN, which would target a retrace back to the June highs, as TRAN has been declining since an early all time high last year. My doubt is therefore less that SPX may not want a retest of the 2020-40 area, and more doubt that on this pattern setup that SPX would reverse there if reached. The obvious target on SPX at that point would be at the retest of the all time high. The same would apply to both INDU and NDX particularly, with more room for lower highs on RUT, NYA and obviously TRAN. Scan 3x 15min SPX INDU TRAN charts:
In terms of judging when these setups are breaking I'm looking at the NDX chart, with gap resistance above and gap support below. Whichever of those gaps fills first is most likely going to be the breakout direction. Scan 3x 15min NDX RUT NYA charts:
So assuming the stat delivers and 1911 is retested next, what then? Well the stat has nothing more to say after that test, but by that stage I think all of these six patterns would have broken down. At that point the obvious target would be a retest of the lows.

Friday 11 September 2015

The Only Certainty is Uncertainty

I've had a lot of questions about the 5DMA Three Day Rule, particularly as SPX bounced yesterday, and I feel a need to explain my position here. This stat has somewhere between 40-60 instances since the start of 2007, and not one of those has failed to make target at the retest of the previous low, with 95%+ then making lower lows from there. Does this mean that I know that 1911 will be retested? No. Does this mean that I believe 1911 will be retested? No. I just consider that on the history, such as retest is very likely. No stat is perfect and one day this stat won't deliver I'm certain. The odds of that being this time however are low.

Nothing is certain. No-one ever knows what will happen. If you need to talk to someone who can talk with certainty and belief about the future then you need to be talking to a priest rather than an analyst, and that priest is unlikely to be telling you where SPX or oil will close tomorrow. Everything about the future in the markets is a matter of relative probabilities until it happens. The probability of this stat failing here is very low, but absolutely not zero. Anything can always go the other way. Nonetheless on the balance of probabilities I am expecting to see that test. SPX daily 5DMA chart:
The bounce yesterday retraced slightly over 50% of the move down on Wednesday, forming a perfect rising wedge that broke down and completed an H&S pattern, that then broke down again. The target for that H&S is yesterday's low at 1937 and I'm not seeing any obvious reason to think we won't see that today. From there I'd expect a continuation down towards the 1911 test. SPX 5min chart:
I'm looking for an AM high that fails again today, as today is the other cycle trend day this week, are there are therefore 70% odds that one side will dominate the day. On this setup I'm expecting that to be the bears. I would add that I've been asked whether there is any time limit to the retest of 1911 and the answer is no. The stat is only that the last low 1911 should be retested before the last high at 1988 is broken. Given this very fast market though I'd expect the retest today or Monday.

Thursday 10 September 2015

Daily Middle Band Retest Fails

The decline yesterday was a hard fail at the retest of the daily middle band on many indices, and the close yesterday, and the open today was significantly under the SPX 5 day MA. On my 5DMA three day rule stat we should now see a retest of the last low at 1911, and 95%+ a lower low there, before there is another test of yesterday's high at 1988.63. I have found no exceptions to this rule since the start of 2007 from at least 40 instances so I'm expecting a retest of 1911 soon, very possibly today. SPX daily 5DMA chart:
If we see the retest of 1911 then Stan is looking for the next short term low in the 1880-90 area, and then most likely a large bounce there before new lows. SPX 60min chart:
Today is a cycle trend day today and that means that there are 70% odds that one direction will dominate the day. This would often be a full trend day. Does the 5DMA stat rule out a trend up day? No, but it makes it unlikely. If we see a full trend day today it should be down. I'm looking for an AM high that fails into a sustained move down today. Nasty tape the last few days though so don't get too married to any trade here.

Wednesday 9 September 2015

Too Many Triangles Lately

SPX broke back over the 5 day MA yesterday with a lot of conviction and that puts SPX back on the 5DMA three day rule. That rule is a very reliable stat that if SPX should close back below the 5DMA either today of tomorrow, then the 1911 low would be retested and most likely broken shortly afterwards. The 5DMA closed at 1941 yesterday so it's some way below, but in a market this fast that's only a bad day away. SPX daily 5DMA chart:
I've been considering the pattern setup here very carefully this morning and SPX is trying to break over resistance on the triangle that has been forming here from the panic lows last week. 1975 resistance was held yesterday but looks almost certain to fail at the open today. The next resistance is the current rally high at 1993.48, and if that breaks, and trading over that is sustained for long, then we will be testing the 50% fib retracement of the move down from 2134 at 2000, and the daily middle band which closed yesterday at 1999.

On a break over these then the obvious next target is the 61.8% fib retrace area at 2030, and that would be a fit with the A=C target at 2029. I would definitely be looking for  failure in that area, but if we were to see a break back over broken support at 2039 then I would start to take the full rally triangle target at 2090 seriously as a target. SPX 5min chart:
Bears are on must perform this morning and must defend first 1993.48 and if broken, the 2000 area. If they both break then I'd be looking for the 2030 area and likely failure there.

Tuesday 8 September 2015

Testing Triangle Resistance

The very obvious read on the SPX moves over the last few days is that a bear pennant is forming. These are triangles that act as a kind of bear flag. These generally break down, hence the name, and this one should very much break down too.

If this big gap up this morning is to test triangle resistance then that is in the 1968 area, but we may well not see anything over the overnight high in the 1964 SPX area (1961 on ES globex), as that was a hit of declining resistance on ES from the highs. If both those levels are broken that wouldn't be that unusual, as triangle trendlines tend not to hold well, but if it is reversing soon then SPX should not go over the last high at 1975.01. SPX 15min chart:
If 1975.01 is broken then the obvious next target would be a test of the daily middle bollinger band at 2006 (and falling fast). A daily close over that would open up a test of 2030-40. SPX daily chart:
Until we see SPX break over the last high at 1975.01, I'm assuming this is a bear market rally and that this is mainly a sell opportunity.

Friday 4 September 2015

Nasty Tape

Today's post is late and brief as I've been out most of the day so far. A one day thing.

Yesterday's tape was a mess. A bullish breakout that failed, then a bearish breakout that failed, leaving a brutal bull trap at the close in the form of a 70% bullish falling wedge, a possible double bottom setup and a supportive 5min buy signal.

Sometimes these are topping patterns though and that was the case here. The wedge has broken down with a target in the 1908 area, and I'm expecting to see a 1903 retest today unless ....... this is a triangle, in which case I'd be looking for support in the 1916 area, not quite hit at the current low today. SPX 5min chart:
We should see a retest of the 1903 low today and really we should see a trend down day today, though there's little sign of that so far. The upside marker for resistance that should not be broken today is 1940-2, and if that's broken then we may be seeing a continuation of yesterday's crazy tape. As long as that holds I'm leaning short here into a 1903 retest with possible (but unlikely IMO) triangle support in the 1916 area. Stan's update this morning is here.

Thursday 3 September 2015

Resistance Levels

SPX is still in the inflection point I was looking at yesterday morning and closed yesterday at declining resistance from 2096 and slightly over the 50 hour MA at 1945. SPX has broken well above both at the open. The setup for today should be as follows.

On a fill of the opening gap at 1948.86 and sustained trade below there I'd be looking for new lows, which should confirm on a break below Tuesday's low at 1903.07

On a break above the ES monthly pivot at 1969 (resistance at globex high), approximately at 1971/2 SPX, and conversion of that level to support I'd be looking for a move to the 2030-40 area, confirming on a break over the current rally high at 1993.48. SPX 60min chart:
The other level to watch is the 5 day MA, which closed yesterday at 1962 and is now at 1957. Bulls need a daily close above it. After that we will go back onto the 5DMA three day rule. SPX daily 5DMA chart:
I'm leaning short here unless bulls can convert 1971/2 as support. It could go either way here though & I'm thinking 65% odds bear scenario and 35% odds bull scenario.

Wednesday 2 September 2015

Two Clear Options Here

SPX made my double top target yesterday, overshooting by just a few ticks before bouncing hard overnight. There are two clear options here, both ultimately bearish, and we should see which option we will be taking today.

The more bearish and more likely option in my view is a rally backtest of 1950 area resistance. the key resistance levels here are the 50 hour MA at 1944, declining resistance from 2096, currently in the 1955-60 area, and (daily closing basis) the 5 day MA, which closed yesterday at 1960. as long as these can hold as resistance then I'll be looking for the next move to be the retest of the October low in the 1820  area.

The more bullish option in the event that SPX breaks over resistance here is a rally continuation into the 2030-40 area and fail there. I'm not thinking that is particularly likely here but there are merits to that retest and we could see it. I'm giving it 30% odds here. SPX 60min chart:
Unnoticed by most the monthly middle band broke at the close on Monday and opened up a strong target at the monthly lower band, currently in the 1838 area and a good match with the more bearish option here. SPX monthly chart:
If we see my more bearish option play out here then I would again ideally be looking for an AM high that dies. We could see a choppy inside day today.

Tuesday 1 September 2015

The Breakaway Gapfill

I was looking yesterday morning at all the double top setups on my optic run indices and they have all been playing out overnight. It seems highly likely at the time of writing that SPX double top support at 1948.33 and the breakaway gapfill at 1940.51 will both be filled at the open, so Thursday's very bullish breakaway gap over resistance is killed off and there is now an open double top target at 1903.18 on SPX. SPX 60min chart:
I'm expecting that 1903 target to be hit today, though we might see a strong bounce first. What then happens at this test of 1900 support will be key. On a hold there we could well see another rally wave up. On a decent break below 1900 I'd be looking for new lows with the obvious target for that still at the retest of the October low at 1820. The daily (2SD) lower band closed at 1890 so on a break below 1900 that would be a very obvious target. SPX daily chart:
Today is a cycle trend day so there are 67% odds of a strong trend in one direction lasting most of the day, though that need not be a full trend day. I'd suggest watching Stan's update video from last night and you can see that here. If we are back into full bear here then I will be looking for an AM high that dies into a strong move down.