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Thursday 28 April 2016

This Time For Real?

A slightly unusual post this morning as I published it early by accident. Rather than delete it and start again I've just edited the post so this is now the completed version if you saw an incomplete version earlier.

That was a very nasty bull trap last night. As the markets closed yesterday the IHS that I was looking at on ES yesterday morning had completed and broken up and SPX closed back above the 50 hour MA. I did note on the ES chart below that I did for theartofchart.net chart service subscribers last night that the breaks needed to survive the night, and they didn't do that, with ES invalidating the IHS and making a new retracement low in globex.

So what now? Well that was a failure at resistance and next up is to see whether SPX and ES can break support. The globex low was at a test of the daily middle band on ES and I'm expecting to see a test of the daily middle band on SPX in trading hours today. Support on SPX is very clear, with a possible sloping H&S neckline in the 2078 area, the current retracement low at 2077, and the daily middle band at 2075. If SPX can sustain a break below these then the H&S target is in the 2040 area, the daily lower band is in the 2035 area, and I have possible larger H&S necklines in the 2030 and 2020 areas that I'd be watching for possible support. SPX daily chart:
That was a nasty bull trap last night but I've written here many times before that when an an H&S or double top/bottom pattern fails, that tends to be just after they break up or down through the neckline/support. This was a classic example of that happening. ES Jun 60min chart:
On NQ there are a couple of H&S options here with a target range in the 4160-4260 area depending on which option seems more likely from what happens now. NQ Jun 60min chart:
On TF I was looking at the impressive trendline resistance that TF was testing when I did this chart last night and noting that it looked impressively solid. It held. TF Jun 60min chart:
Bears have a chance to move this topping process along to the next stage today. Support is clear and all they have to do is break it if they can. I like their chances here as long as yesterday's high at 2099.89 isn't broken. I say the next stage because after the first topping pattern plays out in a process like this then then a larger topping pattern will generally form. As I said, I'll be watching the possible H&S necklines in the 2030 and 2020 areas for possible support.

Today is a cycle trend day and so there are 70% odds that either buyers or sellers will dominate the day, though this does not require a full trend day. On this setup the bears are starting with a clear edge, though predicting direction on cycle trend days is very tricky, so that doesn't necessarily mean much.

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