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Monday, 11 April 2016

Daily Middle Band Support

On Thursday and Friday there was an impressive battle at daily middle band support on both SPX and RUT. At the close on Friday the bulls had still not conceded the daily middle band, and if that isn't going to break then the next obvious target would be the daily upper band currently in the 2076 area. On a move higher there are still open and obvious targets at the IHS target at 2082 and declining resistance from the 2015 high, currently in the 2090-2 area and a decent looking match with possible trendline resistance and the 200dma on RUT, currently both in the 1135 area. There are daily sell signals fixed across the board here, with both daily RSI 14 and RSI 5 sell signals fixed on both RUT and NDX, and a strong daily RSI 5 / NYMO sell signal on SPX, but a marginal new high wouldn't invalidate those sell signals, and are a real possibility here unless bears can break SPX and RUT below the daily middle bands on a daily closing basis. The SPX and RUT daily middle bands closed Friday at 2045 and 1095 respectively. SPX daily chart:
On the bear case here the bears broke below the important 50 hour MA (currently at 2057) and held it as resistance for the second half of last week. As long as that remains resistance then that is strong resistance overhead. If bulls can convert that back to support then that opens up the higher targets. There is a decent looking upsloping H&S that has formed with the neckline currently in the 2035 area and on a sustained break below there the H&S target would be in the 1985 area, not far above the 38.2% fib retracement of the rising wedge at 1974 and the possible H&S neckline in the 1969 area. SPX 60min chart:
On the bull case here the H&S has not broken down and may not break down, and the alternative pattern read on last week's action from the high is that a falling channel has been established that would be a likely bull flag on the bigger picture, and that on a break over flag resistance, currently at 2062.50, the first target on that flag would be a retest of the 2075 high and very possibly a marginal new high above there. SPX 15min chart:
Stan and I did a public chart chat last night and you can see the recording for that here. We were explaining there why we were favoring the marginal new high scenario there and we're still favoring that. I'd give the odds in favor of bull scenario here at about 60/40. The new ES weekly pivot at 2046 (2053/4 SPX) will be a key battleground today and whichever side can convert that into strong support/resistance will most likely dominate both today and tomorrow. The gap up this morning is favoring the bulls further as long as the opening gap doesn't fill.

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