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Wednesday, 13 April 2016

Crazytown Take #2

A few days ago, when ES made the current rally high, ES hit the Crazytown level that I mention from time to time as an extreme overbought level relative to the 45 day pivot. That level is at 2068.5 today and has already been hit overnight. I'm looking for a stronger push into the Crazytown area today and ideally a hit of declining resistance from the 2134 high on SPX, currently in the 2090-2 area and that is approximately in the 2082-5 ES area. I'm expecting that hit, if seen today or possibly tomorrow morning, to be the rally high, at least for a strong retracement.

Obviously SPX has taken the bullish option that I was favoring yesterday morning and is likely to at least retest the current rally high at 2075 today. That move is a break up from a bull flag as I mentioned yesterday morning and is also, though less definitely, a break up from a bullish triangle. If the triangle is right then I'd expect to see a decent backtest into an AM low this morning and then a thrust up into the new rally high, most likely in RTH today. SPX 60min chart:
ES playing out as I laid out yesterday morning. No negative divergence yet on the 60min RSI but expecting to see that develop later. ES Jun 60min chart:
The upside targets for SPX on a higher high over 2075 are the IHS target at 2082 and declining resistance from the current all time high at 2134. That is my preferred target and if we see a hit and reversal there then that would open up a downside target in the 1770 area and, counter-intuitively, be strong confirmation that SPX is not in a bear market, as that level is the resistance trendline on a bigger picture bull flag. Watching with great interest. SPX daily chart:
If this isn't a triangle break up on the SPX 60min chart, and Wave E was very small, then SPX may well just head straight to target without the AM low first. That would be much less fun to trade but might happen anyway. My ideal high targets today are in the 2090-2 area on SPX and the 1134 area on RUT. A hit of those areas would be an interesting short for potentially a 300 handle decline (on SPX) from there. If that level breaks on SPX particularly that would invite a test of the 2134 high. I'm not expecting that at all but as ever, price can always go the other way.

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