- WE'RE JUST RANDOM SPECKS OF DUST IN A TORNADO TO THE MARKETS .......
- CHARTISTS MUST PUT ALL BIAS ASIDE AND LET THE CHARTS DO THE TALKING OR WE'LL SEE ONLY WHAT WE WANT TO SEE
- This blog has a copy of all header posts that I publish anywhere, so that those interested in seeing what my thoughts are on the markets can find them easily.
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Wednesday, 21 June 2017

Mind The Gap

I always enjoy using literary, philosophical or other references in the titles of my posts when I'm not summarising the central theme of the post in it, and this post narrowly escaped being entitled 'The Curious Incident of the SPX in the Daytime', before I decided that the central message of this post was too important not to be used as the title. The title would have been a reference to a quote from the famous Sherlock Holmes short story 'The Silver Blaze'.


The point is of course that while NDX/NQ did almost exactly as I predicted in my post last night, reversing in the right area back to the retest of the daily middle band on NDX, closing a handle below it, SPX/ES and RUT/TF were left at the starting gate, both closing not far above the lows for the day. What does this mean? Well at the least it means that the possible extension higher that I was looking at on SPX/ES if NDX/NQ now breaks up towards the all time high retest is now unlikely, and if NDX/NQ breaks up here then I wouldn't be looking for more than an all time high retest on SPX/ES, and likely not even that on RUT/TF.

The inflection point that I was looking at in my post last night though was very much on NDX, which closed the day at the point of decision, and with SPX having tested the daily middle band as support again today and held it again, this means that the direction from this inflection point may well be decided overnight. If so, a resolution upwards would then likely be confirmed with a breakaway gap up over daily middle band resistance on NDX, and a resolution downwards might well be signalled with a breakaway gap down through daily middle band support on SPX. If so those gaps would likely not be filled and the move in the selected direction would likely be a strong one. Hence the title.

SPX held the daily middle band at the low today and the daily RSI 5 sell signal reconfirmed after the higher high. If SPX can break that daily middle band support then this is a strong bear setup, though the sell signal would probably survive the alternate retest of the all time high on SPX. SPX daily chart:
NDX closed a handle under the daily middle band, having broken slightly over possible double bottom resistance. If this is what I would call a Janus bear flag, very like the one I was looking at on TF last night, then NDX would fail hard from this area into a minimum target at a retest of the low of the pattern at 5633.34. If this is a double bottom breaking up then the daily middle band gets broken and converted with a minimum target at the full retest of the all time high. There is no real middle ground on this setup so it's very likely one or the other. NDX daily chart:
The ES and NQ futures charts below were done after the RTH close for Daily Video Service subscribers at theartofchart.net. If you are interested in trying our services a 30 day free trial is available here.

On ES there is a decent quality falling channel established from the high and, if that can be broken, then there is a decent double bottom setup that would look for a retest of the all time high on a sustained break over 2440.25. ES Sep 60min chart:
NQ has broken slightly over double bottom resistance and is in the inflection point here. A strong break in either direction from here likely keep going to either the top or the bottom of this range. NQ Sep 60min chart:
TF looked a bit lost today, and has converted the weekly pivot to resistance with the rejection from there at the high. A break below possible bull flag channel support currently at 1393 opens the downside. TF Sep 60min chart:
Which option do I favor here? I'm thinking this is pretty much a coin toss, with possible a slight edge towards the bear case. We'll see what happens overnight. .

Stan and I are doing our free educational webinar at theartofchart.net tomorrow afternoon an hour after the close, and that is the third webinar in our Managing Risk series, subtitled 'Position Sizing, Trade and Money Money Management', and if you'd like to attend then you can register for that on our June Free Webinars page. I would also note that this week's edition of The Weekly Call is posted and that the model portfolio there is up 178% in the seven months to May 19th, obviously well on course to make our target minimum 200% return over the first year. As and when that target is reached we're thinking of making the strategy there a bit less conservative. That's a free weekly service and if you trade futures I'd suggest adding it to your reading list.

Tuesday, 20 June 2017

One More Heave .... Um .... Again

I've had a gum infection this week and that has been affecting my sleep patterns and my powers of concentration. Hopefully it will mostly have passed by tomorrow, as it has definitely improved from yesterday to today.

I'm getting a post out before I go to bed tonight though because there is likely to be an important inflection point coming this week, possibly as soon as tomorrow, and everyone should be aware of that.

The short term picture on SPX / ES is that a triangle formed last week and broke up yesterday. I look at that more closely on the ES chart below but the way these generally work is that you see the initial break up (yesterday), then a backtest back into the triangle (today - possibly completed), and then a thrust up to a higher high, at which point we hit the inflection point that I'm looking at this week. When the triangle thrust ends the thrust is usually entirely retraced.

The distance covered by the triangle thrust isn't something where any meaningful target can be calculated. These vary from marginal higher highs to significant new impulses up, so resistance levels and the pattern of the thrust up will be important.

SPX tested and held the daily middle band as support on Thursday and Friday last week and that always risks a return to the daily upper band, which was retested at the new all time high on Monday. There is a decent case that the triangle thrust just retests that high and likely makes a marginal new high, and I'll explain why that is on the NDX daily chart. SPX daily chart:
The inflection point is very clear on this NDX chart. A possible double bottom setup has formed, and NDX has broken slightly over double bottom resistance before retracing today from the test of the daily middle band as resistance. As long as the daily middle band holds as resistance then this is a bear flag forming with a minimum target at a retest of last week's lows. On a break above the daily middle band, and conversion to support, this is a double bottom with a minimum target at a retest of the all time high. That is the key inflection point this week, as SPX is leading both NDX and RUT by such a distance this week so far that a retest of the ATH on NDX would likely propel SPX up by twenty or more handles, putting a push to 2470-80 into range. NDX daily chart:
The ES and NQ futures charts below were done after the RTH close for Daily Video Service subscribers at theartofchart.net. If you are interested in trying our services a 30 day free trial is available here.

You can see the triangle clearly here on ES, and the retracement today tested the top of the target range. That may be enough, but ideally today's decline follows through tomorrow to the ideal retracement target at the weekly pivot at 2431.25. If so the odds are decent that that a 60min buy signal would be brewing at that test. ES Sep 60min chart:
NQ reached the test of the monthly pivot at the low today. The ideal retracement target again on NQ would be the weekly pivot at 5707.25, and that is made more attractive as a target by rising megaphone support likely crossing the weekly pivot tomorrow morning. Again, if that target is reached a 60min buy signal might well be brewing there. NQ Sep 60min chart:
TF was interesting today for a couple of reasons. The first reason is that there was also a compelling case that a double bottom was forming with a target at a retest of the all time high on TF. That double bottom broke up slightly through resistance and then retraced most of the way back to last week's low today. This is therefore what I would call a Janus bear flag, with a minimum target at a full retest of last week's lows. If we are to see that tomorrow then that supports a bit lower on ES and NQ.

The second reason that TF was interesting today is that there is no longer a strong bull setup on TF for an all time high retest. That weakens the case for an all time high retest on NQ, though TF is still currently in a possible bull flag channel with the same target of course. TF Sep 60min chart:
Is there a possibility that the indices break down directly from here? Unlikely but I'd still put the odds of that at 20%. If that is going to happen then those weekly pivots will be broken and converted to resistance, and that will signal the early failure. That's very much the alternate scenario here though. This retracement likely ended at the lows today or ends a bit lower tomorrow, and after that we should see a new all time high on SPX and maybe higher from there, if NDX adds fuel to the move by breaking over the daily middle band. We'll see what happens at that point.

Stan and I are doing our free educational webinar at theartofchart.net on Thursday afternoon an hour after the close, and that is the third webinar in our Managing Risk series, subtitled 'Position Sizing, Trade and Money Money Management', and if you'd like to attend then you can register for that on our June Free Webinars page. I would also note that this week's edition of The Weekly Call is posted and that the model portfolio there is up 178% in the seven months to May 19th, obviously well on course to make our target minimum 200% return over the first year. As and when that target is reached we're thinking of making the strategy there a bit less conservative. That's a free weekly service and if you trade futures I'd suggest adding it to your reading list.

Thursday, 15 June 2017

The Big Dippers

Yesterday's setup favored the bears on the backtest of a cluster of resistance and fibonacci levels on NDX, today's lows on SPX and NDX have so far been marginal higher lows against the current retracement lows and that has me wondering about possible triangles forming here.

There is now a very decent looking double top setup on SPX that on a sustained break below 2415.70 would look for 2384/5. That is in a strong support range which I have detailed in the notes on the chart. SPX daily chart:
On NDX the main support level that I'm watching below is the possible H&S neckline area around 5568. As with SPX, if these support levels are reached then decent odds that we see significant rallies there. NDX daily chart:
The ES and NQ futures charts below done were before the RTH open for Daily Video Service subscribers at theartofchart.net. If you are interested in trying our services a 30 day free trial is available here.

The double top setup very similar on ES. I've mentioned the increased risk due to yesterday's marginal lower high against the ATH that a bull flag may be forming here rather than a double top. The weekly pivot at 2428 is an important level for direction today and, if broken, I have a short term double bottom target from the lows this morning at 2433.75. ES Sep 60min chart:
I mentioned on NQ that the bear flag wedge turned channel that broke down overnight has a strong minimum target at the full retest of Monday's low at 5642. That minimum target is highly likely to be tested and hasn't been tested yet. Likely unfinished business below. NQ Sep 60min chart:
Watching important resistance at the weekly pivot at 1412.90. TF Sep 60min chart:
I think this reversal has legs, but the buy the dippers have had everything their own way for so long now that the decline is likely to start off being very spiky, with buy the dippers jumping on every possible long opportunity until they become discouraged. It should be fun to daytrade though, and this move should set up a larger next move coming soon that should be less spiky.

Stan and I are doing our monthly free webinar on these Big Five tech stocks at theartofchart.net today an hour after the close, and if you'd like to attend then you can register for that on our June Free Webinars page. I would also note that this week's edition of The Weekly Call is posted and that the model portfolio there is up 178% in the seven months to May 19th, obviously well on course to make our target minimum 200% return over the first year. As and when that target is reached we're thinking of making the strategy there a bit less conservative. That's a free weekly service and if you trade futures I'd suggest adding it to your reading list.

Fifty Back

I was saying on my twitter at lunchtime that the 70% option was a fail at weekly pivot resistance and the 50% retracement level on the NQ chart and that duly delivered after a slightly nonplussed pause after the FOMC rate rise at 2pm as the market tried to work out whether such a heavily trailed announcement qualified as news and, if it did, whether such expected news could really be a credible reason for markets to react to it. Honestly I have no idea what the answers to those questions might be myself, but the setup favored the bears regardless and duly delivered the reversal at obvious resistance.

Key trendline support on the NDX charts is megaphone support currently in the 5650 area, and the near miss at the last test is suggesting strongly that will break on the next test. NDX 60min chart:
The ES and NQ futures charts below were after the RTH close for Daily Video Service subscribers at theartofchart.net. If you are interested in trying our services a 30 day free trial is available here.

On NQ the rally rising wedge broke down and as this is a likely bear flag on the bigger picture this should deliver a minimum target back at the retest of Monday's low, though if reached we will be looking for a likely move to the next big support level and possible H&S neckline in the 5550 area. NQ Sep 60min chart:
Are there any obvious weeds in this bearish rose garden? Yes, as the ES weekly pivot was tested at the intraday low and in globex since then, and this important support level on ES is holding so far. Until that breaks any declines are necessarily going to be modest. ES Sep 60min chart:
TF broke down from the rising wedge today which boosts the bear case here. TF Sep 60min chart:
In effect equities are currently stuck in a range between the weekly pivot on NQ on the upside and the weekly pivot on ES on the downside (weekly and monthly pivot levels always clearly marked on my futures charts). One of those needs to be broken and converted to resistance or support to open lower (70% odds) or higher (30% odds) targets. Not expecting to wait too long to see that break and that should be a downward break on this setup, unless bulls can rally through it. We aren't assuming that they can't do that, but until we see that we are favoring the downside.

Stan and I are doing our monthly free webinar on these Big Five tech stocks at theartofchart.net on Thursday afternoon an hour after the close, and if you'd like to attend then you can register for that on our June Free Webinars page. I would also note that this week's edition of The Weekly Call is posted and that the model portfolio there is up 178% in the seven months to May 19th, obviously well on course to make our target minimum 200% return over the first year. As and when that target is reached we're thinking of making the strategy there a bit less conservative. That's a free weekly service and if you trade futures I'd suggest adding it to your reading list.

Tuesday, 13 June 2017

All Fall Down

The decline on NDX on Friday was over 4% high to low intraday, and that was the mot powerful one day decline that I've seen on an equity index in some years. I was talking on Thursday last week about the resistance trendlines on NDX and AMZN still being in doubt, and both were nicely clarified at Friday's high. I also mentioned in that post that before the swing high that we are expecting here Stan and I would ideally like to see new all time highs made on all of SPX/ES, NDX/NQ and RUT/TF, and we saw all of those made before the reversal on Friday. This is a high quality candidate swing high here, but I'm just going to talk about NDX/NQ today as that has been driving the equity bull bus this year, and is the most important place to see high quality highs being made.

On NDX the broken rising channel expanded into a solid rising megaphone and the NDX low on Monday morning was a near miss of rising megaphone support. This generally signals that the trendline will get a full retest in the near future and would usually break at that test. NDX 60min chart:
On NQ there is now a decent looking IHS that on a break back over and conversion of the weekly pivot to support (5774) would look for a retest of the all time high. That's the scenario I would prefer to see here, and if it delivers then that would likely make the second high of a double top. The alternate scenario is that the rising wedge that I have marked in is a bear flag wedge, which on a break down should quickly take NDX/NQ back to retest Monday's lows. NQ Sep 60min chart:
Stan and I do a service on five of the key tech stocks at theartofchart.net (called The Big Five service), so we chart these a lot, and these are updated versions of charts I did for that last Saturday. Those five stocks are AAPL, AMZN, FB, NFLX & TSLA, and I'll have a look at one chart for each of those below, updated to show this afternoon's prices of course.

AAPL has made a very decent looking high at a strong rising megaphone resistance trendline from the 2009 lows. AAPL broke shorter term rising support and reconfirmed an RSI 5 weekly sell signal on Friday. No sign of a strong rally on AAPL so far and on a break below the weekly middle band it may form an H&S at a neckline in the 138-40 area. AAPL weekly chart:
I was looking at three possible resistance trendline options on AMZN last week and as sometimes happens the one that fixed wasn't one of them. The AMZN high on Friday established an overall rising channel from the early 2015 low and  a shorter term rising wedge from the 2016 low. I've been watching the rising wedge on the weekly RSI 5 for a break as these produce very high probability targets back at the 30 level (on RSI 5) and that broke wedge support at the close on Friday and fixed that target. We could see a high retest on AMZN, though the rally so far has been thin. AMZN weekly chart:
FB broke 2017 rising support for the second time on Friday and tested a possible asymmetric double top support trendline at the low on Monday. This level is also a possible H&S neckline of course and the obvious read here is that FB is forming a right shoulder for that H&S that would have an ideal right shoulder high in the 152.5 area. Both RSI 14 and RSI 5 weekly sell signals fixed at the close on Friday. FB weekly chart:
NFLX was already on fixed weekly RSI 14 and RSI 5 sell signals at the start of last week, but broke rising wedge support from late 2016 at the low this week. Not much of a rally so far since then and it may be that NFLX is going to head directly to the possible H&S neckline in the 138 area to form a topping pattern there. NFLX weekly chart:
TSLA had me puzzled for a while last week when it broke up from a very decent rising channel. As channels don't tend to overthrow bearishly that was a concern but by the end of the week TSLA had just expanded the channel out to a higher alternate trendline. This doesn't happen that often but is something I see regularly and is not bullish beyond that expansion. TSLA is close to retesting that new high which is good, as a full retest will establish shorter term negative RSI divergence including setting a daily RSI 5 sell signal brewing to join the RSI 14 sell signal that has already fixed there. TSLA daily chart:
I was saying in my premarket video on Monday (posted on my twitter before the open), that I liked the case for an ATH retest on NDX/NQ. I still like that case and a decent, though not great, quality IHS has now completed forming that could deliver that retest. At the same time I would note that the rally from Monday's low so far has been within a perfect rising channel on NDX so far, and that obviously may well be a bear flag channel that on a break down would have a minimum target at a retest of Monday's low. NDX has reached the 50% retracement of the decline from Friday's high to Monday's low and this is an obvious inflection point. The likely options here are either that ATH retest or that low retest and I'm not expecting to wait long for that decision to be made.

I'd prefer the ATH retest, helped by the gentle showers of dove guano scattered by the Fed tomorrow as is their habit on FOMC days, but it could go the other way, particularly if the Fed raise interest rates from almost nothing to slightly more than almost nothing as many fear they may do tomorrow. As actual interest rates are set by treasury prices and yields, and these are already up 50% on the 10 year treasury from a lot more than either Fed number from the low last year, I find the interest in these Fed moves mystifying, but if enough people take these seriously then that is enough to move markets short term.

Stan and I are doing our monthly free webinar on these Big Five tech stocks at theartofchart.net on Thursday afternoon an hour after the close, and if you'd like to attend then you can register for that on our June Free Webinars page. I would also note that this week's edition of The Weekly Call is posted and that the model portfolio there is up 178% in the seven months to May 19th, obviously well on course to make our target minimum 200% return over the first year. As and when that target is reached we're thinking of making the strategy there a bit less conservative. That's a free weekly service and if you trade futures I'd suggest adding it to your reading list.

Thursday, 8 June 2017

The Importance of Trendlines

My apologies for the lack of posts so far this week. I've not been feeling great and it's been a struggle just to keep up with my daily output for subscribers at theartofchart.net. Planning to resume these posts on a daily basis from this post today.

Last Friday NDX/NQ broke a strong resistance trendline, and that has opened up higher targets, not so much on NDX/NQ, though I have a longer term resistance trendline on NDX in the 6000 area that I will definitely be watching with great interest if reached. NDX 60min chart
The next really interesting trendlines however are on SPX, as the initial rising wedge has clearly now evolved into a rising channel with the channel resistance trendline currently in the 2550 area, so in the absence of a break below channel support, currently in the 2380-5 area, that will remain a possible target. That's not the only, or even the best, target above, as there are also two possible alternate wedge resistance trendlines above, with the lower trendline also the rising wedge resistance trendline on the bigger picture wedge from the early 2016 low. That would be the most likely target here and I have that currently in the 2485 area.

I was talking about this setup in my premarket video at theartofchart.net this morning and have cut a five minute clip from there where I am looking at all five of the charts used in this post. You can see that clip here. In that clip I refer to a setup on GC that I was looking at on Monday morning showing the three good trendline options there that were making me doubtful about seeing a high in the 1280s. The third and highest trendline option was tested a few hours later so just sayin'. You can see that three minute GC clip from my premarket video on Monday here.

SPX 60min chart:
The ES and NQ futures charts below were done before the open for Daily Video Service subscribers at theartofchart.net. If you are interested in trying our services a 30 day free trial is available here.

On ES I was treating yesterday's low as a solid candidate for the short term retracement low and there's been nothing to change that view so far today, though this remains a big news close to the week with the British general election today. It seems unlikely that Britain's halfwitted opposition leader will be elected, but if there's a big surprise at the polls then the prospect of having an avid fan of the economic policies of Castro and Chavez heading a major western economy could obviously be a significant market mover tomorrow. ES Jun 60min chart:
NQ has been weak today and the possible double top there is looking more dangerous than before the open. I have serious reservations about seeing much more upside on NQ as of our Big Five tech stocks only AMZN looks as though it might have more that minimal room to the upside without major resistance breaks. AAPL, FB, TSLA & NFLX all look done or very close to being done. NQ Jun 60min chart:
TF as delivered the 1416 retest that I was looking at this morning and may well be on the way back to retest the ATH at 1425. Good reason to think TF makes that ATH retest though not much reason currently to think it goes much higher. TF Jun 60min chart:
NDX/NQ and RUT/TF are both looking as though they could fail hard in the very near future, which raises doubts in my mind about the options that I've been outlining for SPX today. What I would say though is that in the absence of a break of SPX channel support, reaching at least the lowest of those trendline options is just a matter of time, and the two retracements on SPX over the last two weeks both bottomed at perfect tests of the 50 hour MA (currently 2427/8), which is what I would expect to see in a strong ongoing move up. Until the bears can at least break under that there is nothing much to see on the short side here.

Stan and I did our monthly free public Chart Chat webinar at theartofchart.net on Sunday afternoon, and if you'd like to see the recording that is posted on our June Free Webinars page. I would also note that this week's edition of The Weekly Call is posted and that the model portfolio there is up 178% (to May 17th) over the last seven months, looking well on course to make our target minimum 200% return over the first year. As and when that target is reached we're thinking of making the strategy there a bit less conservative. That's a free weekly service and if you trade futures I'd suggest adding it to your reading list.

Friday, 2 June 2017

One Way Days

Apologies for the intermittent update schedule this week. I haven't been feeling that great and I suspect a couple of really good nights of sleep over the weekend are a high priority. Posting schedule will be back to normal next week.

I mentioned on Tuesday that yesterday and today were the cycle trend days this week. These sometimes deliver full trend days, but the other kind of day they can deliver is a day where one side dominates the day, but not to the full extent of a trend day. These days tend to make an AM high or low and then just inch in the chosen direction all day without any real retracements. Yesterday was such a day, and today so far as well.

That was unfortunate for my double resistance on NDX which was tested this morning and held for a while before NDX inched through it. That opens the test of the double trendline resistance in the 5900 area that I was talking about on Wednesday, and at the time of writing I'm wondering if NDX might test that today. NDX 60min chart:
ES hasn't done much more than retest the overnight highs in RTH today, but on the bigger picture the next serious trendline resistance that I have here on SPX is main rising wedge resistance currently in the 2485 area. That isn't a target here, but it would be a strong resistance level if tested. SPX daily chart:
The ES and NQ futures charts below were done before the open for Daily Video Service subscribers at theartofchart.net. If you are interested in trying our services a 30 day free trial is available here.


ES is still testing the rising wedge resistance on this chart and, NQ permitting, that may hold. The possible 60min sell signal that I was looking at before the open fixed in the first hour of RTH. ES Jun 60min chart:
 The possible 60min sell signal that I was looking at before the open on NQ also fixed in the first hour of RTH. With strong trendline resistance holding then at the time that was a very nice opening setup for bears. Not so much after that resistance broke and this push up on NQ failed the sell signal. That was really impressively bullish. NQ Jun 60min chart:
The 60min sell signal also fixed on TF in the first hour of trading today and that hasn't failed and is trying to reconfirm on the higher high in RTH. The sustained trade over 1400 however is very much making the full ATH retest at 1425 a likely target next week. That probably wouldn't kill that 60min sell signal if seen. TF Jun 60min chart:
We may not see any significant retracement on indices so if the bears have anything to say here, the chances are that waits until next week. I'm heading out to dinner with the kids & will be back to watch the close. Stan and I are doing our monthly free public Chart Chat webinar at theartofchart.net on Sunday afternoon at 4pm EDT, and if you'd like to attend then you can register for that on our June Free Webinars page. Be there or be less well informed! You can sign up for that here. Everyone have a great weekend. :-)