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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.

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