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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.

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