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Thursday, 7 April 2016

A Fatted Calf

I was talking about the conflict between the daily sell signals and the shorter term buy signals yesterday morning, and that was resolved yesterday with a strong rally that made most of the buy signal targets and made the possible near miss targets on the remainder. Yesterday was a cycle trend day and that was obviously dominated by the bulls. Today is the other cycle trend day this week and if bears can take it there is now a clear path back to 2000 roasted, stuffed, and ready to go if bears can return to yesterday's support and break down through it. If today is dominated by the bears, then that will be the obvious next target.

The first thing for bears today is to break down through wedge support on the very nice looking 70% bearish rising wedge that formed from the lows yesterday and overthrew bearishly at yesterday's close. If this is a full reversal wedge then that can take us straight back to retest yesterday's lows. SPX 1min chart:
I'm using the ES, NQ and TF charts that I did last night for theartofchart.net chart service subscribers below so these do not include the globex action since. On ES the ideal right shoulder area at 2062 was reached with the globex high at exactly 2062. If ES returns to yesterday's support in the 2035 area then the H&S will be fully formed, and if it breaks down then the target will be in the 2000 area. ES Jun 60min chart:
NQ made a marginal new high yesterday and there is now a nicely formed double top that would target the possible larger H&S neckline in the 4365 area on a sustained break before yesterday's lows. NQ Jun 60min chart:
On TF (RUT futures) the rally yesterday only made the possible near miss target on the 60min buy signal, but the double top setup with the target in the 1077/8 area is still in play and I have also drawn in the neckline on a possible H&S that could take back to the 1060-5 area on a break below that neckline. TF Jun 60min chart:
Overall this is a simply beautiful topping setup with a clear path back down to a retest of 2000 ES (2009 SPX area). The bears still need to deliver it of course, but yesterday's short term buy signals are played out, the daily sell signals are strong. There is a potential breakaway gap down at the open that may be signalling a strong move down today if it remains unfilled, and ES is currently under the first key battleground today at the weekly pivot at 2050.50 (2059/60 SPX area). If bears can convert this back into resistance and prevent the opening gap from being filled then we could well see a trend down day and the next big target on a break below yesterday's lows is the 2000 area on ES (2009 SPX area). If bears fail and the opening gap fills then most likely we see a retest of the rally high on SPX and very possibly higher. Today should be an interesting day. Trade safe :-)

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