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Friday 22 January 2016

Short Term Swing Low May be In

Stan and I have been doing educational webinars on Thursdays every couple of weeks or so for the last few months at theartofchart.net, and yesterday's was on the subject of trading in bear markets and trends presented by Stan and myself with guest panelist Mike Vacchi of Princeton Trader. If you missed that because the room ran out of seats, or just would like to see the recording, that recording is posted here.

As an aside, Mike Vacchi runs the Princeton Trader trading room, which focuses on trading ES and NQ intraday. Stan and I are both on the trading team there. If you have been having trouble trading futures successfully this month, and have the self-discipline to follow simple directions (surprisingly often not the case) then I'd mention that Mike gives two week free trials and that that you can sign up for these here. So far in January on the room trades there has been one red day (last Thursday) with a loss of one handle, and the best day was yesterday which was up 38 handles. Room trades are up a total 200 handles on the month as of yesterday's close.

One of the things we were looking at was the importance of the 100 week MA in confirming bear markets and I ran the stats on that this morning for the lifetime of SPX. The SPX retest stats are as follows:

1930 - Retest and fail to new lows
1938/9 - Test as resistance for a year then break up
1940 - Retest and fail to new lows
1947 - Retest and fail to new lows
1953 - Retest and fail to new lows
1957 - Broke up to lower high, made lower low, then uptrend resumed
1960 - Broke above for 4 weeks, then lower lows, then uptrend resumed
1962 - Broke up and resumed uptrend
1966 - Retest and fail into new lows
1969 - Retest and fail into new lows
1973 - Retest and fail into new lows
1978 - Broke up to lower high, made higher low, then uptrend resumed
1981 - Retest and fail to new lows
1987/8 - Test as resistance for a year then break up
1990 - Fail to higher low then uptrend resumed
2000/1 - Retest and fail to new lows
2008 - Retest and fail to new lows
2011 - Retest and fail to new lows
2015 - Broke up into lower high then lower lows

Do we need to see a retest of the 100 week MA before more downside? No, as the current situation is like 1957, when SPX broke back up into a lower high last year and then broke down again this month. It is main resistance here though while we are in this bear trend / market, and if we see a break back above it, currently at 2007, then that would strengthen the case that a significant low has just been made, though I think it is unlikely that any really significant low leading to sustained new all time highs can be made without at least a test of rising support from the 2009 low, currently in the 1750-60 area.

Yesterday SPX rallied to my 1890 trendline target, failed there from a rising wedge formed from Wednesday's low (posted on twitter as the move was peaking), and then retraced 38.2% of that wedge. I posted on twitter as that reversed back up that this was potentially the start of a new bull move up and that that is what we have seen. Where will that move end is the question for today.

I posted the volume spikes on the daily SPX chart yesterday morning showing why at least a short term low might be forming or already have been made. That is looking pretty good on the action so far this morning. For today there are two obvious IHS options and at the time of writing SPX may well be going with option 1, with an IHS target fixing in the 1970 SPX area. If SPX sees sustained trade over 1900 this morning I'll be expecting that to play out, with a possible fail area in the 1950 area where I have a potential larger IHS neckline. On a sustained break back below 1850 from here we could see a retest of Wednesday's low at 1812 and possible continuation lower. SPX 15min chart:
Today is a cycle trend day, which means that there are 70% odds that either buyers or sellers will dominate the day. That doesn't have to be a full trend day, but often will be. On this pattern setup, if bulls can sustain trade over 1900, then we may well see a trend up day. Trade carefully today and everyone have a great weekend. :-)

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