- 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.
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Friday 30 October 2015

Living in Crazytown

The 45 day pivot on ES is at 2010 today and in the 70-85 range above that so far today ES has been in Crazytown (70 handles above) and Bet The House (80 handles above). ES has been trading in these areas all week so, as I mentioned a week ago, SPX is very vulnerable to a sharp correction starting here, and the chances of starting another significant move up from this area are low. Not much to see on the short side here until we see some support trendlines break but the next likely significant move is highly likely to be down, so there's not much to see on the long side here either, other than intraday.

When was the last time we spent several days trading at these kinds of extremes? Just before the October low. Just sayin'.

As and when the bears can deliver a decent day or two downside I have a high probability daily RSI5_NYMO sell signal brewing. As and when that signal fixes we should see a decent decline, which I'd be expecting from this area soon in any case. SPX daily chart:
SPX is on a 60min sell signal here and could fail at any time. the next intra-wedge target is wedge support, currently in the 2072 area and I'd be expecting that to break down at the test. SPX 60min chart:
I've been looking for an NDX target at likely rising wedge resistance and we may have seen that now, though there is space to go a little higher still. Again NDX is on a 60min sell signal and could fail at any time now. NDX 60min chart:
We are doing a free Chart Chat at theartofchart.net on Sunday and will be looking at options going forward on equity indices, USD, EURUSD, GBPUSD, oil, nat gas, gold, silver, gdx etc. I can promise that it will be extremely interesting. If you don't find it interesting due to a lack of interest in fine TA, then it will at the least be informative and free :-) You can sign up to see that here.

Thursday 29 October 2015

Grinding Higher

I had a very nice looking high probability daily RSI5_NYMO buy signal brewing a few days ago but it never fixed and was run over in the collapse upwards from 2000. I now have a new signal brewing and if that fixes, then we should see at least a decent retracement. SPX daily chart:
There has been a 60min sell signal in place on SPX for a while now, and that hasn't been invalidated yet. As and when the current rising wedge breaks down we should see a nice move. Rising wedge support was slightly missed at the low yesterday which suggests either that it will break when it is next tested (bearish) or that this wedge is about to break up into a rising channel (as marked). The bear option seems a lot more likely but this has been a very strong move. Not wise to rule the bull option out altogether. SPX 60min:
NDX is reaching for the larger degree rising wedge resistance that I've been watching this week and needs just a little higher to hit that. A strong retracement is well overdue and should start soon. NDX 60min:
There's not much happening on the short side here until we see a break below wedge support on SPX. In the meantime the obvious lean is a bit higher on NDX and RUT, and SPX will most likely follow suit. Lean is for an AM low to buy today.

Wednesday 28 October 2015

When Doves Meet

The big news today is the FOMC dove convention from which few are expecting any interesting news. No doubt we'll get the usual blather about how the huge step of raising interest rates from almost nothing, to slightly more than almost nothing, will only be done after all the current Fed members have been carried out of Fed HQ in caskets. That may or may not be bullish but it's hard to see a big move from FOMC today.

The decline on SPX didn't quite hit wedge support yesterday and that is unfinished business below. That is currently in the 2057 area and rising at about 12 handles per day. There is still a possibility that this is a rising channel and, if we were to see a break over wedge resistance before a test of wedge support, that would increase the odds of this evolving into a rising channel considerably. SPX 60min:
I have a slightly higher target in the 4670-80 area on NDX that we may well see hit before a more meaningful decline. NQ looks cooked and ready to go though so that's a maybe. NDX 60min:
Both SPX and NDX have open 60min sell signals and could start a larger decline at any time. There may well not be much to see either way before FOMC at 2pm, and there is an obvious high retest target on SPX at 2079 that we could hit before FOMC.

Tuesday 27 October 2015

More Short Term Sell Signals

The rising wedge on SPX/ES that I posted on Monday morning still looks fine and the obvious next move is a retracement into wedge support, currently in the 2042 area and rising at about 20 handles per day. With open 15min and 60min sell signals, that wedge support could break. SPX 60min chart:
There are also open 15min and 60min sell signals on NDX but the larger degree rising wedge suggests that NDX has a little higher to go before a serious retracement. In the meantime the rising channel support is in the 4460 area, which is unlikely to be reached without the rising wedge on SPX breaking down. NDX 60min chart:
Today is the other cycle trend day this week so there are 70% odds that buyers or sellers will dominate the day. If we see a trend day today the more likely direction would be down.

Monday 26 October 2015


The bulls had a very good week last week, helped by Draghi's announcement on Thursday that we should expect more european QE, and then the BoC lowering interest rates and the deposit requirements for banks. However, on a big news event like this, and regardless of what happens afterwards, there is very often a retracement of the initial spike to revisit and retest 'the scene of the crime', and one thing very much coming through from the charts I was looking at over the weekend was that we may well see see that retest in the first half of this week on SPX, NDX and of course USD.
The charts are from my weekend subscriber updates at theartofchart.net today, which will often be the case on Mondays and Thursday, but particularly so this week as the clocks changed in the UK over the weekend, so I'm losing an hour every morning this week until the clocks are back in sync next Monday.

I'm watching the weekly chart with great interest this week as SPX is now testing broken primary rising channel support from late 2012. At the same time the declining resistance trendline on the weekly RSI 14 from June 2014 is also being tested. No break would fix until the close on Friday but a break up on that RSI trendline particularly would strongly suggest a retest of the all time high. On the other hand if bears can deliver a weekly candle this week that closed back under the middle band having retraced most or all of last week's candle, then that would negate last week's breakout candle. SPX weekly chart:
My brewing daily RSI5_NYMO sell signal was run over by the Draghi bull train on Thursday and Friday, but there is a double top setup still on the RSI 5 that would normally deliver a move to the 30 level (on the RSI 14) if that RSI double top breaks down on a daily closing basis. SPX daily chart:
If we are going to see a retracement from here today, which is the obvious option, but predicting the direction on trend days can be tricky, then I've sketched in the three next obvious options after a test of rising wedge support, currently in the 2040 area and rising at about 12 handles per day. SPX 15min chart;
The futures charts look interesting and I've left the bonus premarket subscriber charts that I posted at theartofchart.net open to all today. I've posted ES, NQ, TF, DX, GC and CL charts there this morning. All of those had strong moves the last three days of last week, and all have setups suggesting that they may well start this week by retracing those. You can see those here.

Friday 23 October 2015

Working Title

Running late today as I was out looking at a school this morning, so I've given everyone access to the charts that I post every morning for theartofchart.net subscribers. You can see those here.

There is only one remaining big resistance level for me (2060 area) before my main scenario will be that SPX retests the all time high, and SPX has gapped over it this morning, so we have a candidate breakaway gap. This is a very bullish development as long as the gap is not filled today. A gap fill would signal that the short term high is either made or being made. SPX weekly chart:
What are the odds that this gap will fill today? Well we really are very overbought on SPX/ES here. I've mentioned before that my trading bud Mike Vacchi of princetontrader.com has a system for measuring overbought/sold on ES relative to the 45 day pivot, which is currently at 1980.92. It's rare to see a signal on this system but the important levels are:

  • 70+ over 45 day pivot - Crazytown
  • 80+ over 45 day pivot - Bet the House
  • 90+ over 45 day pivot - Extremely rare area with no name - Working title 'WTF?'
We hit 91 over the 45 day pivot at the RTH high so far today. Generally a level at crazytown or higher will trigger a strong reversal within hours, though that took three days at the October low if I remember rightly. I've only been watching this for a few years but I can't remember any that didn't trigger at least a strong short term reversal. We'll see how this one goes. 

Thursday 22 October 2015

The Moment of Truth

After the close yesterday I had a very careful look at the declining resistance trendline from 2132 using very thin trendlines. The high yesterday tested that trendline twice, and the obvious rally target has therefore been hit. Looking at NDX and RUT there are quality trendline highs on all three indices, with a daily RSI 5 sell signal now fixed on RUT, and close to an RSI5_NYMO sell signal on SPX. If this has just been a rally, which seems very likely, the top should now be in. Even in the event that this hasn't been a rally the short term high should now be in, though in the latter case the resistance trendlines established yesterday would obviously be less strong.

SPX has tested declining resistance from 2132 and reversed there so far. There is no clear overall pattern on SPX but that trendline is one half of the overall pattern that should become apparent later. SPX daily chart:
NDX has established a decent falling channel from the high, and a perfect, if unusual looking, rising wedge from the August low.  The obvious next target within the wedge is wedge support, currently in the 4240 area. NDX daily chart:
RUT has established a falling channel from the highs, and has a very nice nested double top setup that has started to break down. RUT daily chart:
Today is the cycle trend day this week. That doesn't mean that we will get a trend day but it does mean that there are 70% odds of today being dominated by either buyers or sellers. Often this would be a trend day but often not. Bears want an AM high that fails into a move down to the obvious SPX first targets at 2000 and the possible H&S neckline at 1990. Bulls want to trend up today and beat the highs this week, killing off the trendline setups on the three indices and opening up higher targets.

There was short term positive divergence at the close yesterday which has translated into this bounce overnight. The key/bull bear area is in the 2030 area and a sustained break above would be bad for the bear case. Bears would ideally like to test 2030 and fail there. I'm definitely favoring the bears on this setup but Draghi has been blathering about increased european QE and possibly negative interest rates coming this morning, and that has pushed ES to the key resistance area before the open. We'll see if the bears can hold it.

Wednesday 21 October 2015

Minority Report

Stan and I launched our subscription services at theartofchart.net about six weeks ago now, and the response has been so good that we were initially buried under our workload there. Things have calmed down a bit now, and we've axed a couple of offerings with a very small subscriber base and are extending our services where they are most popular. As part of this I've started posting bonus charts before the open every day, mainly using futures charts, and the ones I posted this morning are interesting enough that I'm going to use them on my post here today.

These are currently available to all subscribers but after I've shaken this new format down for a while it's most likely just going to be a bonus for premium triple play subscribers. We're planning a midday update service to start soon and that will most likely be aimed again at premium subscribers.

The ES chart here looks very toppy, with a rising wedge that has broken and retested support, and an open ES 60min RSI 14 sell signal, as well as open RSI 14 sell signals on the SPX 60min and 15min charts. ES 60min chart:
The sell signals are the same on NQ (and TF) here too, and the rising wedge there has made a bearish overthrow and then broken down. Again this looks like a topping process at a late stage of development and while it may make a marginal new high, the rally looks about cooked here. NQ 60min chart:
There is a minority report here on TF (RUT futures) though, which I'll be watching today with great interest. I mentioned on Monday that there was a confluence of various resistance levels there in the 1180 area, and TF rising wedge resistance is now at 1180, with a possible ascending triangle target in the same area. That's a pretty decent ascending triangle on TF and it could break up. At the current correlation with NQ and ES that could push both beyond the obvious target areas, so I'll be keeping a close eye on TF here. TF 60min chart:
Stan and I are both looking at 2046 SPX as a very attractive target and very strong resistance. My ideal scenario today would be a test and hard fail there. Stan has a V shaped profile for today on ES, which can be a V day in either direction, so a push up into the European markets close and hard fail afterwards is very possible today. We shall see how the session develops.

Tuesday 20 October 2015

An Awful Lot of Sell Signals

A 15min sell signal fixed on SPX yesterday and at the close yesterday there were fixed sell signals on the 60min and 15min RSI 14s on all of the SPX, NDX and RUT charts. There was a similar, though weaker, setup back down at 1870 when this rally started, which was a major warning signal of reversal.

On SPX there is a near perfect rising channel so I'm calling the SPX pattern as that channel. Channel support is in the 2025 area and support at broken resistance in the 2020-2 area is a solid floor until SPX can sustain a move below it. There isn't anything really going on the short side here until that happens. SPX 15min chart:
If we do see a break down then there is a very nicely formed daily RSI5_NYMO sell signal forming here, These are very reliable signals and if we see that signal fix I'd be looking for an absolute minimum move to retest 1970 or 1950. For that to fix though we would need a few days of trading sideways or a one solid red day. SPX daily chart:
As long as 2020-2 remains a floor I'm looking at declining resistance (from 2132) in the 2046 area as the obvious target for that move. If we are going to see that target hit today then I'd be looking for an AM low that fails into dip buying.

Monday 19 October 2015

No Gap Up Today

One thing I really dislike seeing in an move up where I am looking for the high, is a close at resistance on a Friday. That invites a gap up on Monday morning to make a breakaway gap and can demolish even the toughest looking resistance area. That doesn't appear to be happening this morning, so that's something for the bears to be cheerful about as they start the week.

I'm going to show the short term pattern setups on NDX and RUT this morning as both are far clearer than SPX here. Could we see failure here? Yes, and a sustained break below Friday's low at 2020 SPX should mean that the rally is over or at least topping out. Do I have compelling looking targets higher? Yes, so until that Friday intraday low is taken out the short side isn't looking particularly attractive.

I'm going to show the 60min charts for NDX and RUT as they give the context better. NDX is on a 60min sell signal and testing resistance at a wedge resistance trendline with a very impressive six touches so far. That is the main strong resistance that I was concerned would be gapped over this morning. Until bulls can convert that into support that wedge resistance is a formidable obstacle. Rising wedge support in the 4390 area is the next obvious target within the wedge. On a break over wedge resistance the next big level would be the 4450 area FOMC high, so there is strong resistance not far above. NDX 60min:
RUT is also on a 60min sell signal, as is SPX of course, but on RUT the case for going a bit higher looks compelling. I was doing monthly, weekly, daily, 60min and 15min RUT charts for theartofchart.net subscribers yesterday, and there are a lot of resistance areas across multiple timeframes meeting in the 1180 area. Resistance in the 1163-5 area has been holding very well so far, and there is a possible double top there, but on a break above I'd be looking for 1180 and that would be a decent fit with a 4450 test on NDX. RUT 60min:
On SPX there is also a compelling target above at declining resistance from the 2132 high. A touch and reversal there would confirm a falling channel from the high, and at 2045/6 and falling now, that is also a decent match with broken support turned resistance area in the 2039-44 range. There is a possible daily RSI5_NYMO sell signal brewing here but that would be unlikely to be affected by a test of that trendline. If bears want to avoid that test they really need to take out the new floor at 2020 as soon as possible, ideally this morning. SPX daily chart:
Do I still think this is a rally? Yes, though if that declining resistance trendline breaks the odds of a retest of the highs would rise considerably. There would though still be one last resistance area to break at the 200dma in the 2060 area, supported by the daily upper band, currently at 2057. Trade safe.

Friday 16 October 2015

Watching the NQ Wedge

SPX has reached my 2025 target and broken it slightly, with the rally high at 2030.70 as I write this. Is this the rally high? Well the rising wedge on NQ says that it should be. I posted this wedge yesterday morning and since then NQ has hit wedge resistance, done a small bearish overthrow, and a 60min RSI 14 sell signal has fixed. The high probability outcome for NQ here is that the next move breaks wedge support in the 4365 area and then does at minimum a 38.2% fib retracement of the wedge into the 4280 area. Once NQ has managed that I'd be expecting to see it go a lot lower. NQ 60min chart:
If the NQ wedge doesn't deliver and SPX pushes much over 2030 then the chances that we will see a retest of the all time high increase considerably, though there would still be two very important resistance areas to watch on the daily chart. 

The first area would be broken support in the 2039-44 range, supported by the 100dma at 2040 and the weekly middle band at 2037. As it is Friday the weekly middle band  should be solid resistance. 

The second area is the 200dma, currently at 2060, and a match with a retest of main broken rising channel support from 2012. SPX daily chart:
SPX weekly chart: 
On the bear scenario the high for today was most likely made at the open. NQ is significantly underperforming ES/SPX so far today and the rising wedge scenario there is looking fine so far. We will see how that goes today. I would say though that so far at least there is no sign of rejection at these levels. I'm hoping those signs appear soon. If the opening high is broken that would not be encouraging for bears here. 

Thursday 15 October 2015

The Red Pill or the (Reddy) Green Pill

SPX made it to 1990 yesterday, within a handle of the full double top target and we may well see a bounce here. SPX, NDX and RUT have all formed decent patterns from the high and the falling wedge on SPX is breaking up at the open. The falling channels on NDX and RUT have not broken up yet.

This is a short term inflection point and either we see a bounce to retest the highs, and most likely fail into a larger decline, or we see a break of yesterday's low and continue the decline. The best bear day would again be from an AM high and fail. The (short term) bull case is best expressed on the NQ chart, where the low yesterday established a very nice falling wedge from the late September low. This chart supports a retest high and fail as long as that wedge support holds.; NQ 60min chart:
The ES chart didn't find any obvious support yesterday but there's room for a second high of a double top in there. ES 60min chart:
Today is the other cycle trend day this week and that could go either way, with 70% odds that the tape is dominated by one side or the other. If 1990 SPX breaks I'd suggest not getting trapped in a long as SPX could drop 200 handles from here in the next three weeks or so. That may sound extreme but I'll post the $SKEW chart on twitter later this morning. That made an all time high on Monday, with a reading that smelled a lot more of black swan than bull. That doesn't mean we fall 200 handles from here, but it does mean that it could be a very expensive mistake to get too attached to any long positions.

This ES and NQ chart were prepared for theartofchart.net chart package subscribers but I think I missed including them with the pack posted last night as I was a bit sleep deprived.

Wednesday 14 October 2015

Backtesting the 50dma

Yesterday was a very good example of a situation where making a higher high isn't bullish, particularly when it is a very marginal new high on strong negative divergence. That high made the second high of a small double top on SPX which then broke down with a target in the 1989/90 area. That's a bit below the 1995 that I was looking for but there are good reasons to think that target will be made. SPX 60min chart:
What are those reasons for thinking 1989/90 should be made? Mainly it is that as well as the double top being a nicely formed pattern, the 50dema is at 1991 and the 50dma is at 1989. This is a very attractive target area. SPX daily chart:
Today and tomorrow are cycle trend days, which means that there are 70% odds that the day will be dominated by either bulls or bears. Bears have the edge on this opening setup and the day works best for them with an AM high that fails. The 50 hour MA closed at 1997 last night and a close below it today would look pretty bearish.

Tuesday 13 October 2015

SPX Should Really Retest 1995 Today

Yesterday's intraday low was broken at the open so the retrace of the thrust up from the triangle should have started now. The ideal target is 1995 and as that's a match with the weekly pivot on ES I'd expect that to be hit. There is also important support getting close on the 60min chart at the 50 hour MA. That closed yesterday at 1985 and is now at 1987. By the time 1995 is tested it may well be close to that level. SPX currently has open 60min and 15min RSI 14 sell signals so while it's possible that SPX might continue to trade sideways today, there is a lot of pressure to retrace here. SPX 60min chart:
NDX broke declining resistance yesterday which opens up some possible higher targets. NDX also has open 60min and 15min sell signals. NDX is in a perfect rising channel over the last few days, so I'm watching to see whether that channel support holds today. NDX 60min chart:
If we do finally see this retracement to 1995, Stan has today as a possible V day, so it may well bounce straight back up from that test. There is a very decent chance that SPX would then be making the second high of a double top or head on an H&S then, before a hard fail in the next few days.

Monday 12 October 2015

No Bricks Without Straw

It's hard to develop a pattern structure without meaningful retracements. I have a perfect rising channel on NDX, but am looking skeptically at my best support trendline prospect on SPX, which would currently require a retracement to the 1950 area to confirm channel support. That's an improvement on RUT where I don't currently have any decent prospects at all for a support trendline. We should see a retracement soon to define these support trendlines and I'm surprised that equities managed to build up negative divergence for the majority of last week without that forcing a retracement.

SPX is still on hourly and 15min RSI 14 sell signals, and my best prospect for an SPX pattern here is shown below. SPX 60min chart:
NDX is on an hourly RSI 14 sell signal too now as that fixed on Friday afternoon. Interestingly the high on Friday was also a precise test of declining resistance from the 2015 high, and that's holding so far. NDX 60min chart:
The short term pattern pathway is a thrust from a triangle, followed by a full retracement of the triangle thrust into the 1995 area. The triangle thrust wasn't showing much in the way of signs of life on Friday, and unless that changes this morning I'll be looking for that retracement into the 1995 area, and would note that is a close match with the weekly pivot on ES which I have at 1186 (ES). If that triangle thrust is still AWOL this morning we'll most likely at the least see that retracement today or tomorrow.

Friday 9 October 2015

Funny Looking Triangles

The significant retracement that I was looking for yesterday never happened, as a triangle formed and then broke up, annoyingly after SPX and RUT both first broke rising channel support. The channel support that held was on NDX, and there is now a perfect rally channel there that I'm going to be using as my marker to show as and when this rally ends.

You probably won't see a triangle on the charts easily but that's because it was just an EW triangle. These often look like classical triangles but equally often don't. This one below on NDX looks like a classical rectangle, but if you look at the RSI 14 then you see the underlying triangle there, which is generally the case. NDX has started a thrust out of the triangle and if sustained then the thrust should form a pattern, and then break down into a full retracement of the thrust. All of the sell signals from yesterday morning are still in place so as and when this thrust fails it will most likely fail hard. NDX 15min chart:
What are the upside targets here. Well on SPX there is obvious resistance at the FOMC high and we saw that tested at the open. If SPX goes higher then my preferred target here would be in the 2025 area, as the setup I'm showing on the weekly chart below tends to either become a bear flag or a double bottom. If it is forming a bear flag channel then the target is the 2025 area. A bear megaphone could go higher, with strong resistance from 2025 through 2045, and very strong closing resistance at the weekly middle band at 2041. On a break over 2045 the double bottom option would become the more likely option, and I'd be looking for a retest of the all time high. The triangle thrust here should still retrace, but at that stage it would be a long entry. SPX weekly chart:
Yesterday was a cycle trend day, which I was saying in the morning had 70% odds of being dominated by either buyers or sellers. I was looking for sellers but we got buyers instead. Today is also a cycle trend day, with the same odds. If bears want control today then they really need an AM high that fails. If we don't see that then bulls may push this up all day. If we see SPX break back below 2009 then then the rally high may well be in, and I'd be looking for a rejection move.

Thursday 8 October 2015

Decision Time - Leaning Short

The big delivery days for subscriber charts at theartofchart.net are Sunday and Wednesday, and on Wednesdays particularly I have been working very late producing them all. As I'm therefore somewhat sleep deprived on Thursday as a result, I suspect that my Thursday morning posts are regularly going to be using a couple of charts drawn from the three or four dozen annotated charts that I produce on Wednesday night.

Yesterday looked superficially good for bulls, but under the surface things were going less well, with 60min RSI 14 sell signals fixing on both SPX and NDX. With SPX and RUT both in fragile looking rising channels that would break down on any significant weakness this morning, the odds of seeing some technical damage early in the session today look good

If we do see SPX retrace today, I'd now be expecting to see a test of rising wedge support with the retracement supported by the 60min sell signals. That wedge support is now in the 1930 area and  rising at about ten handles per day.  SPX 60min chart:
NDX has more room before a break over channel support, but should follow SPX and RUT if they break their channel support trendlines. NDX 60min chart:
Today is a cycle trend day, which means that there are 70% odds that the market will be mostly one sided today. That doesn't mean we see a full trend day today, though I think we might well. I'm looking for an AM high today and then downside for the rest of the day. I'm not going to get too excited about that until the SPX and RUT channels break down. SPX channel support is now in the 1988 area, and RUT channel support is in the 1146 area.

It's important to remember that after the channels break, we may then need a reversal pattern, and that could involve retests of the current rally highs. That's a key reason why buying or selling breakouts just after the break can be a very high risk trade.

Stan and I are doing a webinar an hour after the RTH close tonight looking at Stan's non-traditional wave counts and how these work with my patterns based charting. If you're interesting the signup link is here.

Wednesday 7 October 2015

Not Staying Here Long

SPX retraced a bit yesterday, rather more so than the daily candle suggested, as the retrace of the channel from Friday's low to yesterday's high was close to the 23.6% minimum in a strong trend. I'm expecting more, but it may go the other way.

If we are going to see more retracement then I'm looking for a double top or H&S to form here to take SPX down towards the obvious targets at rising support from the 1871 low and a retest of the daily middle band, now at 1948. SPX 15min chart:
SPX daily chart:
Looking at the first hour of trading today the obvious reversal pattern option here would now be an H&S rather than a double top, and there are two other things to consider here. The first is that 60min sell signals are now brewing, and if they fix then they most likely won't have made target by the time that the daily middle band was retested. The second is that the high so far today is 1999.31, so that was a test of the second possible rally target area that I listed on Monday morning on the daily chart above. If we see a hard reversal here then this could be the rally high. If so SPX would break back below the daily middle band and convert it to resistance.

Tuesday 6 October 2015

Expecting Retracement Soon

Well that certainly wasn't a rejection candle yesterday, with the daily candle closing some 30 handles above the close on Friday, and with the close clearly above now broken falling channel resistance. However there is increasing negative divergence and I'm expecting some retracement soon. The first obvious target would be a retest of the daily middle band, now at 1948. SPX daily chart:
There is no 60min signal yet, but both RSI 14 and RSI 5 are very overbought. A 5min sell signal fixed yesterday afternoon, and any significant weakness this morning should fix the 15min sell signal that is also brewing here. It's too early to have a definite pattern for this rally but the main target on any retracement may be rising support from the 1871 low, currently at 1916 and rising at about 13 handles per day. Ideally I'd be looking for that to be tested in the 1940 area late tomorrow or early on Thursday. A break of that rising support would most likely mean that this rally high had been made, though until then I'd be looking higher. SPX 60min chart:
SPX might make a marginal new high before the retracement I'm expecting, but I wouldn't expect that to be much higher than yesterday's intraday high. This is very tricky tape though, so caution required.

Monday 5 October 2015

Daily Middle Band Resistance Broken

Bears needed a close under the 5dma on Friday, and for a while it looked as though they could deliver that. Bulls took back control though and rallied almost sixty handles to close back over the daily middle band. That was a very significant show of strength, and unless bears can deliver a rejection candle today, which would be a tall red candle reversing most or all of Friday's gains, we should see more upside. I'm not expecting to see a rejection candle today though.

So what are the upside targets here? Well there is some resistance in the 1970-80 area, including the 38.2% fib retrace at 1970 and falling channel resistance at 1978. There is a second resistance area at 2000, with the 50dma at 2000, the 50% fib retrace at 2001, and the upper band currently at 2005.

My preferred target though is close to the 61.8% fib retrace at 2032, as that would be a decent match with the obvious pattern setup on SPX here, which is that this is either a bear flag or double bottom forming. There is an obvious double bottom setup here with a retest of the all time high on a break over the FOMC high at 2020. With the second low of the possible double bottom slightly higher than the first, we would often see double bottom resistance broken slightly to establish a bear flag channel. then fail. Ideally that high would be in the 2025 area and would set up the next leg down.

Is there a chance that the double bottom setup is actually a double bottom setting up a retest of the all time high? Very much so, though I'd be surprised. If that happens we will know when SPX breaks back through broken Feb to Aug support at 2039-45, and then the 200dma, currently at 2063 and falling. SPX daily chart:
Falling channel resistance at 1978 has been tested since I capped the chart below. That is an obvious level to see a decent retracement if we are going to see one today. SPX 60min chart:
What are the odds that the main low is in? Low in my view, but always a possibility. Even a retest of the all time high at this stage would most likely be making the second high of a double top. Stan & I did a free Chart Chat webinar yesterday, and if you want to see the recording you can find that here.

Friday 2 October 2015

NFP Disappoints

Bulls had a weak start but recovered strongly yesterday. That set up a rising channel that on the bigger picture is likely to be a bear flag. I was carefully considering upside resistance levels within that flag but the NFP number was bad, and it seems likely that the bear flags of various kinds on the various equity indices are likely to break down this morning.  Scan 3x 60min SPX INDU TRAN charts:
Scan 3x 60min NDX RUT NYA charts:
One thing I missed in my very intense week was that SPX broke above the 5DMA on Wednesday, and with the close above it again yesterday, that makes today day three on my 5DMA three day rule.  The SPX 5DMA is at 1908 today and a close below it today gives a very high probability that the 1871 low would be tested and most likely broken on the that test. SPX 5DMA chart:
Leaning bearish here. The 1871 low never looked convincing and I'm expecting it to be broken soon. On a strong break below the full flag target would be in the 1780 area, and it's worth noting that I gave that as a possible target a few days ago because SPX rising channel support was there is still close. That  is a credible target that could be made if bears can avoid losing their car keys again for a few days.