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Monday, 4 April 2016

Crazytown

I've referred a number of times before here to Mike Vacchi of Princeton Trader's system for measuring oversold and overbought levels relative to the 45 day pivot, and that was recalibrated earlier this year to adjust for the big move up on SPX over the last few years. The new level for reaching Crazytown is 92 handles above the 45 day pivot and that was reached at 2065 on Friday and again overnight at 2070. This is an extreme level of overbought, and is a high probability swing short entry if you can be patient and are prepared to take some heat until the market turns. I've put a small swing short position on at 2070 ES. I am patient and prepared to take some heat though, so that isn't for everyone.

What are the odds of SPX turning today? Well I mentioned on Friday morning that the first trading day of April was historically a very dangerous day to be short and the bears duly got their asses handed to them in a very powerful move up to new rally highs. The stats for today are less bullish but not a lot less bullish, and we could see Friday's move extend upwards. If so the obvious target would be the IHS target on SPX at 2082. There is however a decent looking double top setup here that could play out and I'll be watching that today. On a break below Friday's low at 2043.98 the double top target would currently be in the 2013 area, close to a possible H&S neckline in the 2005 area. We'll see whether the bears can beat the historical odds today in this extremely overbought market.

The key short term support today on SPX, as it was on Friday, is the 50 hour MA, and that closed in the 2050 area. To deliver a decent retracement bears need to convert that to resistance. SPX 60min chart:
On ES the key support level today is a bit higher at 2050.50, so that's in the 2058/9 SPX area. That's the weekly pivot this week and again the bears need to break it and convert it to resistance, ideally as early in the week as possible. The chart below is last night's chart but the overnight action is encouraging for bears, with marginal new highs and possible 60min sell signals brewing on both ES and NQ. If those fix with some early weakness today that would be a very good start to the week for the bear side. ES Jun 60min chart:
As I've been writing the 60min sell signals on both ES and NQ have fixed, and that's a good start to the week for bears. Let's see whether bears can convert the support levels below at 2050.5 ES and then 2050 SPX. The advantage they start with today is that SPX is at an extremely overbought level. We'll find out shortly whether that is enough to turn this very resilient bull move.

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