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Wednesday, 5 October 2016

Uncertain Direction

I have a bit of a windows bug with my keyboard, as if the 'Sleep' button is pressed my computer will go to sleep. That would be ok except that when the 'Wake Up' button right next to it is pressed, nothing happens at all. I have been unable to find any way to wake up my computer other than a hard reboot, and on that reboot I lose any unsaved work. For this reason mainly my office is a cat free zone.

Last night I lost about two hours of unsaved work after accidentally hitting this key and have used a lot of time today redoing it. I didn't manage to get a post out in RTH, so I'm doing a post close wrap post to look at the pattern setup on the indices here. I did do the premarket video for Daily Video Service subscribers at theartofchart.net, and hopefully some of you saw that after I posted the link on my twitter at the open. If not you can see that here and I was particularly pleased with my NG call today which delivered beautifully.

After yesterday's move I started work on my post market charts with the working assumption that the high was in, but when I had a careful look at the ES 60min chart, the low was unexpectedly strong, and raised the very real possibility that the triangle that Stan and I were assuming had broken down was still in play. The ES, NQ and TF charts I'm using below are from the post-market bonus charts that I post every night for Daily Video Service and Chart Chat Service subscribers at theartofchart.net. ES Dec 60min chart:

On the SPX chart the triangle looks like this. SPX 15min chart:
On NQ the original triangle was still in play, just with a deeper backtest. That broke up today into what should be the triangle thrust up, but didn't retest the ATH today. If it's going to retest that I'm expecting that tomorrow. NQ Dec 60min chart:
On TF the original flag was still in play.. That broke up this morning and was backtesting broken trendline resistance at the close. That should at least deliver a retest of the 1261 high, though obviously a flag will frequently not stop at the minimum retest target. TF Dec 60min chart:
So what are the prospects for the rest of the week? Well the first thing to say is that this high window ends on Friday, and possibly might extend to Monday, but if the high is going to be in the window, which it usually would be, then there are only two days, possibly three, remaining to make this high. If we are going to see this short term bullish setup play out, then it needs to be fast, and with NQ just under the all time high, then we might just see a retest and fail there, which would likely limit prospects for upside elsewhere. This rally could fail at any time, and this isn't a market to get married to any long positions, as after this high is in we should see a retrace that will be significantly larger than the one in September, and obviously the high may already be in. On the short term bull scenario we shouldn't see a break below yesterday's low at 2144 SPX of more than two handles, and ideally that won't be retested at all.

I tweeted at the open this morning that the key for this bull scenario was the conversion of the ES weekly pivot at 2154 (~2162 SPX) to support, and while ES closed RTH under that today, and remains below it, ES traded much of the day above it, and there was no obvious rejection from it. SPX also closed at 2159.73, a clear break back over the daily middle band at 2153, a marginal break over the 5dma at 2158, and twenty ticks above the 50 hour MA at 2159.53. If bulls can build on that tomorrow then we may yet see that retest of the ATH on SPX at 2193, though to get there the tape will need to speed up somewhat from the torpid action that we were seeing today. If we see a break of 2144 SPX with any force at all then the high is very likely already, in and the decline that we are expecting to dominate October should be in progress.

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