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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 :-)

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