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Tuesday 31 May 2016

Last Post for May

Today is the last trading day of May and unless we see a really serious decline today, the monthly candles for May on NDX and SPX are going to confirm breaks above the monthly middle bands, which at the least isn't going to do any harm to the bull case.

Shorter term SPX is still within a rising channel and is close to a test of the April high at 2111. Given that the retracement from that high was in effect a bull flag channel, that retest is the first target for that flag, and may be the second high of a double top, if SPX retraces enough after the test to break the rising channel.

What I'd add though is that all of SPX, NDX and RUT are on daily upper band ride, with NDX having closed over the daily upper band the last three trading days. In effect this is like a trend up day in that the impulse up ends when it ends. It can get very expensive counter-trend trading on both trend days and band rides, regardless of the amount of RSI divergence, though there is certainly a lot of that on both the 60min and 15min charts. SPX daily chart:
The pattern from the retracement low isn't well defined, but looks like a rising wedge, which is cautiously promising for some downside soon. There are RSI 14 and RSI 5 sell signals brewing on the hourly chart, as there are also on the NDX and RUT hourly charts. All of these will fix on the first decent retracement, so there is a lot of downside risk here. SPX 60min chart:
I did the TF chart below last night for subscribers at theartofchart.net. TF tested the rising support trendline overnight and it's held so far. When it breaks the short term bear case will look more promising. TF Jun 60min chart:
The test of the April highs that is happening here on SPX and RUT, though not on NDX, is an important inflection point, and there is good reason to think that these might well be the second highs of double top patterns for a deeper retracement of the move up from the February low. There is a lot of shorter term negative divergence here. We'll see whether bears can hold the line at a retest. On a sustained higher high over 2111 the next obvious target would be the retest on SPX of the all time high at 2134.

Friday 27 May 2016

Roll On The Weekend

On SPX this is day three of a daily upper band ride. The upper band is at 2096.92 at the moment and the current intraday high has already tested that. At the time of writing ES has broken over the resistance at the 2092.75 area that has held the last two days, and if that break is sustained I have a working breakout target at 2103.25 that may well be hit. ES Jun 60min chart:
NQ has been trickling up. As with ES and TF there is a fixed 60min sell signal but it's possible that we won't see any meaningful retracement until the double bottom target has been hit (target on the chart). NQ Jun 60min chart:
As with NQ, TF still has an open reversal pattern above, and a possible bull triangle forming at the time I capped the chart. TF Jun 60min chart:
Obviously the big new today is the Yellen speech at lunchtime. That may or may not have any interesting news in it. We'll see. Today and Tuesday are bracketing a holiday weekend, so volume will be thin and that would generally favor the bulls. Unless there is a negative reaction to Yellen's speech I'm not really looking for any meaningful retracement today. That said there is a lot of negative divergence and sell signals abound on the 60min and 15min charts. That mainly means that neither long or short looks particularly appealing here.

This weekend is a rarity for me as it is a holiday weekend in both the US and the UK. As the last day of the weekend is a big work day for me that means that I get two days off this weekend rather than one. I'm planning to catch up on sleep and the new series of Game of Thrones so I'll be having an unusually relaxing weekend. I hope everyone has a great holiday weekend. :-)

Thursday 26 May 2016

Rising Wedges Turned Channels

The bulls delivered a strong confirming daily candle and tested the daily upper band on SPX yesterday. The good news for bears is that 60min sell signals have now fixed on ES, NQ and TF, with all of them looking close to starting a decent retracement. The bad news for bears is that if seen at all, the low on that retracement is most likely a strong buy, as the technical picture has now shifted heavily in favor of the bulls. I'll explain why below.

I'll start with the most bear friendly of the daily charts. On RUT the obvious next target is a retest of the current swing high, though the limited retracement seen so far would suggest that retest should be the second high of a double top before a larger retracement. On the TF chart there is an open IHS target at the retest of the current swing high. RUT daily chart:
That's pretty much the end of the good news for the bears. On SPX the rising wedge from the February low has now evolved into a rising channel. That means that until that channel breaks down, with rising channel support currently in the 2040 area, the obvious lean is bullish and this may well be a rising channel to take SPX to a new all time high. I've been mentioning regularly over the last few months that I was and am doubtful that the bull market high for the move from the 2009 low had been made, and this may be the channel for that last move up. Hard to say where this move would top out but the compression on SPX is arguing for an extended band ride in either direction, the channel shifts the odds towards an upper band ride while it lasts, and I'd just mention that I have channel resistance currently in the 2220 area. This move could run up a while. SPX daily chart:
The initial rising wedge on NDX has also evolved into a rising channel, which again favors the bulls here. NDX daily chart:
If this is an impulse wave up then it's important to remember that short setups can and will fail a lot. Sell signals will also fail regularly. We're already seeing this to an extent, as the trendline and divergence setup at the close on Tuesday was very bearish, and was then shrugged off on Wednesday morning in a way we really haven't seen much lately. There is a very solid setup for a decent retracement here, and if seen a very obvious target area in the 2065-70 area. Will we see that retracement? Maybe, and if so it is likely to be a dip to buy. If we are going to see that retracement then the best chance to see it is today, as it is the last cycle trend day this week, and tomorrow and Tuesday are bracketing the holiday weekend, traditionally days of thin pickings for bears. The opening setup looks promising. We'll see how that goes.

Wednesday 25 May 2016

Expecting Some Downside

SPX broke back over the middle band yesterday with some confidence, and I was going to be writing this morning about the bears needing to put in a strong reversal candle today to avoid the daily upper band at 2088 becoming a strong target. As the morning high so far is at 2089 I'll be skipping that part, and talking about the likely retracement that we should nonetheless see starting today. There is now no reason to think that we would see a strong reversal daily candle today, but nonetheless we should at least see a decent retracement and maybe more.

Where does this leave the indices on the bigger picture? Well as long as the daily middle band holds as support on the retest I think we may be about to see, then the obvious next target on SPX is a retest of the swing high at 2111. I also have an open double bottom target on NQ that I'll be showing below that will be worth bearing in mind.

Yesterday's move was very powerful and all of ES, NQ and TF are in likely rising megaphones, and testing resistance on those megaphones. All three have 60min sell signals brewing and we should see a decent retracement start very soon. ES Jun 60min chart:
NQ Jun 60min chart:
TF Jun 60min chart:
I didn't call yesterday as a cycle trend day because Stan said it was lower probability than the ones today and tomorrow. Could ES/SPX trend up today? Possible but they are looking stretched already. Even if they are going higher some retracement first looks higher probability here. We'll see.

Tuesday 24 May 2016

Testing The Monthly Pivot

The bears had a chance to fail and continue down yesterday but couldn't manage it, so we are running the bullish scenario that I was looking at yesterday morning. Since I posted the charts below at theartofchart.net this morning ES has gone through the declining resistance trendline in the 2062 area, and is trying to convert the monthly pivot at 2063.8 to support. If that succeeds the the ideal right shoulder high on the larger alternate H&S that I strongly suspect is forming on ES here would be in the 2072-5 area. ES Jun 60min chart:
TF is now over the 50% fib retrace at 1118.50 and is testing the 61.8% fib retrace target at 1127. This is a strong resistance area and a sustained break above would open up a possible retest of the current swing high at 1155. TF Jun 60min chart:
Is there a case for retesting the current swing highs? There doesn't need to be really as that is a standard topping setup and these often happen unexpectedly. In this case though the nicest looking setup for this is on NQ and I was saying this morning on the chart below that a sustained break over 4410 on NQ would fix the double bottom target in the 4535 area. With NQ at 4421 as I write NQ is trying that out for size now. NQ Jun 60min chart:
If we see trend up today, and that is a very real possibility, then we could see the equity indices break some serious resistance levels. On SPX the key levels to watch are the daily mid band at 2062, which needs to be broken on a closing basis today, the 61.8% fib retracement at 2078, which needs to be respected if this isn't a move to retest the current swing high, and 2090 which is where the daily upper band is now.

Monday 23 May 2016

An Inflection Area

Decent rally on Friday that has failed so far either to make a higher high or to break over the 50 hour MA on SPX, so unless that changes I'd expect the rally to be reversed in the near future, and that may well happen. There is a possible alternate scenario here where SPX might be forming the H&S on a larger and flatter H&S pattern, and if so the ideal high would be a bit higher in the 2075 area. That would be very close to the 61.8% fib retracement of the decline from the highs so far and is obviously still potentially in play. Stan's bull/bear line is the 2039 ES area (approx 2043/4 SPX) so I'll be watching that area for possible support this morning.

The short term pattern on SPX is a decent falling channel and channel resistance hasn't been tested yet. A lower high under Friday's high could deliver that this morning and we may well see that. SPX 60min chart:
This is last night's chart on ES but since then a possible double top setup has formed that would target the 2031 (~2035 SPX) area on a sustained break below 2043.5 (~2047.5 SPX). ES Jun 60min chart:
The early warning of Friday's rally was the open 60min buy signals remaining on ES, NQ and TF after Wednesday's rally. ES has made the near miss target and NQ and TF both made the full target, but after a marginal higher high overnight a 60min sell signal has fixed there. TF Jun 60min chart:
The ES weekly pivot this week is at 2047, so about 2051 SPX. If bulls can hold that as support then this rally may be heading higher. A beak below opens a possible test of Stan's bull/bear line at 2039 ES (~2043 SPX), and a conviction break below there should mean that the rally from Thursday's low is retraced in short order, most likely in a decent leg down.

Friday 20 May 2016

Support and Resistance on Opex Friday

Nice call from Stan on his Wednesday night video when he gave 2024 ES as the support to watch on ES yesterday and, if support was found there, then a likely rally to either the 2041/2 area or a retest of the weekly pivot in the 2053.8 area. I was hoping that ES would just trend down through that support but it was not to be, and ES is currently testing the ES weekly pivot area.

On SPX yesterday was the second day of a possible lower band ride. If that is to continue then the overnight rally needs to be reversed and the daily lower band, currently at 2033 SPX, need to be hit at some point today. Support is there and at the 200dma at 2011. Resistance is at the 5dma at 2050, the 50 hour MA at 2056, the 50dma at 2060 and the daily middle band at 2065. SPX daily chart:
Is there a bullish scenario here? Of course, the market can always go the other way and, if we were to see a break back up over the daily middle band at any point that was not reversed the next day then, the upside would open up. That doesn't seem particularly likely here but I would note that I have possible scenarios on both ES and TF here where the current H&S patterns might be evolving into larger H&S patterns with more horizontal necklines, and if this AM high this morning doesn't die then that might well be in play here. ES Jun 60min chart:
TF Jun 60min chart:
As I was saying yesterday morning, one of yesterday or today was likely to be a trend day and obviously that didn't happen yesterday. Main resistance on ES here is the weekly pivot at 2053.8 and if bulls can break that and convert it to support then we could trend up today. If we see a strong rejection at this test then equally SPX & ES may well trend down for the remainder of the day.

Everyone have a great weekend :-)

Thursday 19 May 2016

The Horse Has Been Led To Water

Yesterday went broadly as expected. The 60min buy signals I was looking at on ES, NQ and TF did deliver the decent rally I was wondering about.The HOD was a shade under the 50 hour MA resistance at 2063 that I mentioned as first strong resistance, and SPX then returned to a new retracement low and the first break below the H&S neckline, though that wasn't sustained into the close. So what now?

Well obviously the bears need to follow through into the sustained break below the H&S neckline that would fix the H&S target at 1965 SPX as a high probability target, but leaving that aside, if this H&S is going to play out, then it will most likely play out as a lower band ride on SPX. The daily lower band was tested at the low yesterday, and that lower band ride may therefore have already started. The daily lower band is at 2036 SPX today and if so, that should at least be hit, though what I'd really like to see today is a strong move down to start the real move down towards the SPX H&S target at 1965.

Today and tomorrow are cycle trend days, and generally one of those would be a full trend day in whichever direction. With opex tomorrow, seeing a trend day today would seem more likely but we'll see.  SPX daily chart:
SPX 60min chart:
Is there any reason to think that we might see a trend up day today, given that it is really difficult to call direction on cycle trend days? Not much, though I'd note that none of the 60min buy signals from yesterday morning on ES, NQ and TF made it to either the target or the possible near miss target. I'll be thinking about that if SPX can recover back over 2040 SPX for long today, maybe. This really is a strong bear setup. I think it's going to play out, though it obviously it hasn't been unknown in the past for bears to just roll over and die at a crucial 'must perform' moment. ES Jun 60min chart:
I was chided gently for a lack of humility on twitter last night and that is a slightly uncomfortable issue for me. For years I've been saying that a lack of humility is a fatal flaw in an analyst, and I still very much believe that. These days though I am also a salesman, and humility is just as much of a flaw in a salesman as it is a virtue in an analyst. I'm compromising by at least pointing out some of my nicer calls as they happen. I don't think I'm in any danger of getting delusions of grandeur and contracting the analyst killer flaw of starting to tell the markets what to do rather than reading the tape with an open mind.

I still have a runner short on from 2066 a couple of days ago. That's at even stop now and given the overall setup here I'm making that a public swing trade with an exit target at 1965 ES (about 1970 SPX). Not as ambitious as the 300 handle short I called a year ago today at the SPX all time high, and cashed in near the February low, but then I'm expecting to make target a lot faster on this one.

Stan and I are doing a public educational webinar after the close today on 'How to Trade Using Elliot Wave'. We're doing another next Thursday on 'Identifying and Trading Reversal Patterns'. We tend to do a couple of these educational webinars every month, If you want to come to either or both then you can sign up for them here.

Wednesday 18 May 2016

Rubber Meets Road

It's been an interesting and rather spiky journey forming the right shoulder on the SPX H&S that I called as possibility a couple of weeks ago now, but that right shoulder is now fully formed and was testing the neckline at the lows yesterday. On a sustained break below that neckline the H&S target would be in the 1965 area, and for a number of reasons that is a very attractive target and possible low area for this decline from the latest swing high. There was a lot of positive divergence on the 15min charts at the close last night and we are seeing a rally this morning. The big resistance levels on SPX that I'm watching here in the event that the rally heads higher are the 50 hour MA at 2063, and the daily middle band at 2070. SPX 60min chart:
Is there some reason to think that the rally today might be stronger than expected? Yes there is. I mentioned the 60min buy signals on Monday morning before the trend up day. I mentioned the 60min sell signals on ES, TF and NQ before the strong decline we then saw yesterday. This morning I have freshly minted 60min buy signals on ES, NQ and TF and am watching the rally this morning with great interest. This morning's rally could run away. Most likely it would run away into a lower high, but that gives 1% of leeway above on SPX at the time of writing, so that could be an uncomfortable experience for shorts holding through that. ES Jun 60min chart:
Unless we see SPX convert the daily middle band at 2070 back into support that H&S is likely to play out. Would I be astounded if SPX closed green today? No. Would I regard a strong rally into a lower high on SPX today as bullish? No. That setup didn't look bullish on Monday night and it wouldn't look bullish today either if seen. There is nothing inherently bullish about rallies into lower highs. If bulls want to deliver something that looks bullish they really need to break back over the daily middle band and then hold it as support on a retest. Anything short of that is just noise.

Tuesday 17 May 2016

Full of Sound and Fury

I was saying intraday yesterday that if the bulls were going to take back control of the tape here, then they needed to break back over the daily middle band, currently at 2072, and then hold it as support on a decent retest. In the absence of that no serious technical damage was being done and there was little reason to expect yesterday's rally to be the start of something bigger.

The situation for bulls here didn't improve overnight, with marginal higher highs and fails from those on ES, NQ and TF which have resulted in 60min sell signals fixing on all three charts. The ES monthly pivot at 2063.80 (2068 SPX area) wasn't successfully converted to resistance on this rally and the weekly pivot at 2054.10 (2058 SPX area) is now being retested as support. If that is reconverted to resistance then all of the significant bull technical gains from yesterday will have been reversed.

I like to post a copy of the bonus charts that I do every morning for subscribers at theartofchart.net here every so often to give an update on bonds, USD, oil etc that I cover there these days rather than here, and I'm running behind today so today seems like a good day to do that. If you'd like to see these every day then you would need to sign up for either of the Chart Chat or Daily Video services, and if you want to sign up for the Daily Video Service then I'd mention that you'd want to do that before the end of May, as we are planning to increase the price for that service substantially then. No price increases will ever be applied to existing subscribers as long as their subscription is continuous, so anyone signed up before then will continue to be charged at the current price for as long as they are still subscribers. Our subscriptions page is here.

ES Jun 60min chart:
NQ Jun 60min chart:
TF Jun 60min chart:
DX Jun 60min chart:
CL Jun 60min chart:
GC Jun 60min chart:
ZB Jun 60min chart:
On the basis of yesterday's and the overnight action I'm still very much looking down on equity indices here, and unless we see bulls break back over the daily middle band the obvious next targets are at new retracement lows unless there are (bearish) triangles forming here on ES and NQ. If so those triangles should still deliver new retracement lows, just more slowly.

Monday 16 May 2016

Watching the Weekly Pivot

Last week finished pretty much to plan, with SPX starting the test of the H&S neckline and everything going as expected. Obviously that H&S neckline needs to break this week, ideally early in the week and without a huge rally that might put the H&S scenario in doubt. SPX 60min chart:
So what would be an acceptable rally that wouldn't risk compromising the downside scenario? Well the ES weekly pivot is at almost the same level as last week at 2054.1 (approx 2058-60 SPX). Backing up the weekly pivot is declining resistance in the 2055 ES area (approx 2059-61 SPX), and the SPX 50 hour MA at 2061. As long as any rally fails in that strong confluence of resistance levels then we remain firmly on the bear scenario here. ES Jun 60min chart:
Are there any reasons to look nervously at that resistance area? Well ........ apart from the bears' obvious history of frequently dropping the ball at awkward moments, there are possible bull setups on both NQ and TF that are warnings to shorts to step back and reconsider if obvious resistance breaks. The stronger setup is on TF where a 60min buy signal has fixed and there is a possible nested double bottoms setup that is showing a possible path back to retest the swing high if bulls can reverse back up hard here. TF Jun 60min chart:
Bulls have their work cut out here though. The first resistance that I've talked about today is strong and I'm expecting it to hold. Next resistance is ten handles higher at the ES monthly pivot at 2063.80 (2068-70 SPX area) and then just above that is the daily middle band at 2074 SPX. Those are strong levels too. Bulls need to break above all of this to be taken really seriously this week. That said, today is a cycle trend day, so it's way too early to dismiss bull prospects altogether. We'll see what happens at the first and main resistance test, which has started as I've been writing.

Friday 13 May 2016

Mañana

Yesterday's tape meandered between boring and frustrating, but the bears are still doing lower highs and lows, and SPX is still well below the daily middle band, and there are still great looking setups to go lower on SPX, RUT and NDX. The most likely next big move on SPX is still that move down to 1960-70 support.

 The ES monthly pivot at 2063.8 (2068/9 SPX) is now looking converted to decent resistance, and bears now need to do the same with the ES weekly pivot at 2053.4 (2058/9 SPX), and then break through the SPX 50dma at 2055 that has held this decline so far, and then do a conviction break below the H&S neckline, currently in the 2042 area.

It would be great if all this could be done during the natural lifetimes of at least some current market participants, and if that is going to happen, then there are worse days to start a strong decline than on a cycle trend day on Friday the 13th. We'll see how that goes today.

What I would say though is that I have a possible falling wedge forming on ES that I would like to see not hit possible wedge resistance again. That resistance is currently in the 2066 area and if that should be hit, then the confirmed falling wedge might be telling us to expect a retest of 2080 soon. That wouldn't mean that the bear scenario here would die, but it would promise an extension in the period spent chopping around waiting for something interesting to happen. ES Jun 60min chart:
No matching pattern on TF and TF has managed to test the H&S neckline now, though that hasn't followed through yet. TF Jun 60min chart:
NQ has formed a possible falling channel from the last high, that actually broke up slightly at the opening high, but no target on that break as that isn't a bull pattern. NQ Jun 60min chart:
I've had a couple of comments about a huge IHS that is forming on SPX here and no doubt some are wondering why I haven't been following that. The reason is simple, and it is that there is in fact no IHS to follow. How can that be? Well an H&S in either direction is by definition a reversal pattern, and that it is a reversal pattern is both a key part of the way that an H&S is formed, and a prerequisite in the way that the performance statistics for these patterns making targets has been compiled. A reversal pattern needs to be reversing a prior trend that is ideally at least twice the size of the pattern. Personally I disregard any reversal patterns that are larger than 61.8% of the prior trend as too large and you may well remember me mentioning doing that before. What we have here is something that looks rather like an IHS, but can't be one, in the same way that the most skilled sculpture of a dog could never actually be a dog, though without any artistic direction behind the similarity in appearance.

What this setup is in actuality is just a declining resistance trendline, with only two touches, not much technical significance, and most definitely without a target in the 2380-2400 area on a break above that would be supported by any historic statistics. Is it possible that we might see a break above that trendline followed by a swift move to that area? Sure it is, but that area still wouldn't be an IHS target, and that it is possible that we could see that, is really just to say that the options for what might happen in the future are less fixed than those in the past. That shouldn't be news, and there is nothing interesting about this setup.

I am in serious need of a day off and have no plans to look at any charts tomorrow. TGIF and everyone have a great weekend :-)

Thursday 12 May 2016

Follow The Red Brick Road

I was wondering yesterday afternoon about a possible bounce overnight to retest the daily middle band on ES as resistance and we saw that test, and it has held as resistance so far. as long as that remains the case we now have mostly formed H&S patterns on SPX, RUT and NDX ready to take all three down on another leg down towards the 50% fib retracement of the move up from February on SPX and RUT, and almost a full retracement on NDX. Here are the setups on those three charts. SPX 60min chart:
RUT 60min chart:
NDX 60min chart:
On the ES chart I'm slightly concerned by the weak 60min buy signal but the path back to the 50% fib retracement of the move up from the Feb low is all laid out for the bears now. All they have to do here is not drop the ball, though obviously this has been an issue on occasion in the past. ES Jun 60min chart:
The next steps on this setup are firstly for SPX to fill Tuesday morning's opening gap at 2058.69 and convert that area to resistance. As it is at the same level as the ES weekly pivot that would mean that both key support areas on ES at the monthly and weekly pivots were converted too. After that a sustained break below the H&S neckline in the 2040 area should deliver the next leg down.

Wednesday 11 May 2016

Uncertain Breaks

Many apologies for the very late post today. I'm not feeling that great & am mainly posting this to explain why I was so doubtful about yesterday's break back over the daily middle band in my comments on twitter last night and this morning. Hopefully most of you saw those. If you didn't, and you'd like to see them next time, my twitter ID is shjackcharts.

In summary the reason I was so doubtful was because although bulls had delivered the two main targets I'd been looking for on a bull break, namely a definite break back over the daily middle band at the close, and a break over declining resistance from the high, those breaks weren't really supported by much else. Neither RUT nor NDX had even tested their daily middle bands and what troubled me most was the three perfect bearish patterns on SPX (megaphone), RUT (wedge) and NDX (wedge), that were all intact and none of which had even overthrown. One thing I really don't expect to see on a bullish break up is three perfect bear flag patterns on these three indices that I follow closely. Obviously that was casting the bull break into serious doubt.

Now I've mentioned before on a number of occasions that a break back through a middle band needs confirmation in the next time period, that being the next day on a daily middle band break. When these breaks fail they tend to fail with a strong reversal candle immediately afterwards that breaks back below the middle band with confidence, often retracing much or all of the previous candle. At the time of writing, it looks likely that we will see such a candle today, and that the daily middle band, currently at 2079, will break back down on the close today.

If so, does that mean that the bull case is then as trashed as most were assuming that the bear case was last night?. Well ...... no. There are three key levels that I'm watching here that bears need to reconvert  to resistance and they are first the ES monthly pivot at 2063.80, being tested at the moment and in the 2068/9 SPX area, then the ES weekly pivot at 2053.40 (2058/9 SPX area) and most importantly there is a candidate breakaway gap level at Monday's close at 2058.69, which is a good match with the ES weekly pivot but it needs to be borne in mind that the spread between ES and SPX tends to vary during the day, and that one is very much an SPX target. Once that gap is filled then the possibility of a bullish breakaway gap at yesterday's open is eliminated and bears just need to reconvert the ES weekly pivot to resistance to start the likely next leg down. Bears didn't deliver that today, but they need to tomorrow, or if SPX trades sideways tomorrow, Friday morning at the latest really. Ideally that support would be broken with a breakaway gap down through it tomorrow morning, though that isn't required.

Here are the respective bear flag patterns on SPX, RUT and NDX. They have all broken down now and the next leg down should now have started, unless bears totally mess up this setup tomorrow of course. We'll see. :-)

SPX 15min chart:
RUT 15min chart:
NDX 15min chart:
I'd like to see a retest of the ES daily middle band at 2073.5 overnight that holds. That may or may not happen but if seen that would be an attractive short entry IMO.

Tuesday 10 May 2016

Testing the Daily Middle Band

The tape was pretty uncertain yesterday and the flush at the close fixed 15min sell signals on RUT and NDX that had me very much wondering whether the rally had already topped out. Happily that wasn't the case and both SPX and ES are now close to a test of the ideal rally target at the daily middle band, currently at 2072.5 on ES and 2079 on SPX. That doesn't need to be tested exactly, the current AM high at 2075 at the time of writing would do just fine.

I would draw your attention to the possible IHS that has formed and broken up on the ES chart below. That's still very much the lower probability option in my view, but it is very much still an option, and if the daily middle band fails to hold as resistance here then that would become the higher probability option, though the opening setup here strongly favors the bears in my view. ES Jun 60min chart:
On  TF a very nice rising wedge has formed from the low and 50% of the decline from the high has been retraced. Since I capped this chart Tf has broken wedge support and should now be in the topping process. This is the nicest pattern setup from the low and obviously favors the bears here. TF Jun 60min chart:
NQ has the messiest pattern setup from the low and it isn't easy to draw any conclusions from it, though I'd note that on all three of the ES, NQ & TF charts there are possible IHS setups here that have all broken up. NQ Jun 60min chart:
Today is a cycle trend day and that gives 70% odds that the day will be directional and dominated by either the bulls or the bears. SPX and ES are now testing strong resistance at the daily middle band and if that holds as resistance then this rally is ending right here and right now, and we may well see a fast and strong rejection. If bulls can break above the daily middle band, and then hold it as support, the upside opens up, that 2090 IHS target on ES starts to look doable, and we may see a retest of the current swing high at 2111.05 SPX. We'll see if that resistance holds.

Monday 9 May 2016

Rally Time - Take #2

As usual on Mondays I'm using the charts I did for theartofchart.net subscribers last night. The ES chart was capped before the globex open last night.

The rally that I was expecting on Thursday morning failed early, and it's possible that the one that started on Friday afternoon might do the same, but if it doesn't I am still looking for a right shoulder to form on the same possible H&S pattern that I was looking at on Friday. It's a decent looking setup and I've detailed the three main rally options on the chart below in my order of preference. The third option is a possible retest of the swing high at 2111, and I'd give that option only 20% odds here, mainly because I know that it's always best to keep the possibility of a retest in mind as an option. SPX 60min chart:
SPX daily chart:
On ES as well as SPX there may be an IHS forming here, so the next step in this rally may of course be a higher low. ES Jun 60min chart:
The weekly pivot on ES is at 2053.40 and this is likely to be a key battleground for any rally this week. The key target areas above on SPX are the 2060-6 and 2075-7 areas, and on a break above 2085/6 SPX we would likely be looking for a retest of the current swing high at 2111.05