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Monday, 25 January 2016

Looking For Some Retracement Here

SPX broke back over the 5dma on Friday with considerable conviction, so today and tomorrow are the other two days on the 5dma Three Day Rule, explained on the chart below. In essence though, if we should see a daily close significantly below the 5dma either today or tomorrow, currently at 1880, then a retest in the very near future of the low at 1812 would be very likely. I have found no exceptions to this rule since the start of 2007 on something like forty instances where there was a Three Day Rule breakdown.

I would add that there are now fixed RSI5_NYMO and RSI 14 buy signals on SPX so I am expecting more upside. That doesn't rule out a retest of the lows but if we see the initial retracement today that I'm leaning towards, I'll be looking for that to be forming a right shoulder on a large possible IHS that would target the 2000 area. SPX daily 5dma chart:
The setup on this SPX 15min chart that I did yesterday was almost perfectly ambiguous but the overnight action is leaning towards the retracement scenario on here. SPX 15min chart:
The overnight action that has me leaning towards retracement first here is that the rising wedges on ES (below) and NQ and TF as well, have all broken down, and these indices are forming short term topping patterns. The obvious fib retrace targets on ES are marked and detailed on the chart below, and if this move is forming the right shoulder on a large IHS the ideal right shoulder low on ES would be in the 1850 area. ES 60min chart:
If bulls can break over 1910 SPX with any force this morning then there will most likely be no retracement. If we do see the retracement it may well bottom out fast and then retrace quickly to close the day back above the 5dma.

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