- 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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Thursday, 20 July 2017

The Wheels On The Bus Go Round And Round

Apologies for the intermittent updates over the last couple of weeks. It's been very busy and I'm hoping to get back to posting every day again next week.

So another round of new highs and I read that the Vix has fallen to a 24 year low this week. There is an emerging consensus that equity indices will never drop meaningfully again and SPX and NDX are getting close to some big round numbers in the 6000 and 2500 areas respectively that are likely to develop a magnetic pull the closer SPX and NDX get to testing them.

So is it time to write off the bears altogether? Well we'll still likely see at least retracements when the setups are right for them and as it happens the retracement setups are looking pretty good right here, though to develop negative divergence on the daily charts we would likely see retracements and then marginal new all time highs on both before any larger move. Those marginal new all time highs, at this point, could test those big numbers at 2500 and 6000.

The move from the last low has formed a decent little rising wedge that has taken SPX to resistance on a decently formed larger rising wedge from the March/April lows. No negative divergence on the hourly or daily charts. SPX 60min chart:
The setup isn't as bearish on NDX, but there is a decent rising wedge from the last lows which is very steep and likely to need at least a retracement soon to establish a less vertiginously steep support trendline. NDX 60min chart:
The ES, NQ and TF futures charts below were done an hour after 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.

On the futures charts the negative divergence here is much more encouraging. I updated these charts an hour after the open today as by then 60min sell signals had fixed on all of ES, NQ & TF.

ES has slightly overthrown wedge resistance on a decent rising wedge from the last low. In the event of a sustained break over wedge resistance I do have an alternate channel option with channel resistance currently in the 2490 area. ES Sep 60min chart:
On NQ there is a similar rising wedge, with the wedge resistance trendline somewhat weakened by two overthrows rather than just one. Again there is a decent alternate trendline above but if there hadn't already been a 60min sell signal fixed, another would have fixed this morning. NQ Sep 60min chart:
Decent looking rising wedge on TF too. TF Sep 60min chart:
This is a very decent looking retracement setup, probably not quite cooked yet. I'll be keeping a close eye on it.

Stan and I are doing the fourth webinar in our 'Managing Risk In Trading' series at theartofchart.net an hour after the close today, and if you would like to attend then you can register for that on our July Free Webinars page. This webinar is dealing with Stop Systems and Trade Repair. I would also note that this week's edition of The Weekly Call is posted and that the model portfolio there is up 170% in the seven months to June 23rd, 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.

Monday, 17 July 2017

Looking For Some Retracement Here

NDX has made it over halfway from the break of the flag to the retest of the all time high, and I am treating that retest as the 70% likelihood option here. On the way though there is a lot of short term negative divergence that will likely deliver a retracement, maybe today but otherwise tomorrow. On NDX that may well require a retest of the short term high first. NDX 60min chart:
NDX has broken back above the H&S right shoulder so as well as the flag channel target back at a retest of the all time high, there is also a failed topping pattern / Janus flag target there, also at that retest. NDX daily chart:
Stan and I are thinking that we see a retracement from this area, then another leg up that at least retest's Friday's high before this move can finish. We are still leaning overall towards a resolution into a bearish expansion here, though we could obviously see the still looking less likely bullish expansion instead and that needs to be borne in mind. Either way, this retracement, if seen, should set up a decent buyable dip. SPX daily chart:
The ES, NQ and TF futures charts below were done 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.

So where might this retracement go? Well the usual target would be a test of the new weekly pivot on ES, which is at 2443. If the current short term high area holds then an possible extension beyond into the 2439 area to hit the 38.2% fib retrace target and the established support shelf there would be a real possibility. We wouldn't be expecting any sustained break below the weekly pivot. ES Sep 60min chart:
The new weekly pivot on NQ is at 5781.50 and that isn't tested as reliably every week, but is on the cards with the decent quality negative divergence on both the NDX and NQ hourly charts. NQ Sep 60min chart:
I wrote on the TF chart earlier that the all time high retest there might need to wait until after this likely retracement but TF just managed that at the high this morning,so of these three only NDX/NQ has an outstanding likely all time high retest still not completed. TF Sep 60min chart:
The short term high may be in and the retracement may be in progress already. If so the retracement has started off slow and choppy and may continue that way as well of course.

Stan and I are doing the fourth webinar in our 'Managing Risk In Trading' series at theartofchart.net an hour after the close on Thursday, and if you would like to attend then you can register for that on our July Free Webinars page. This webinar is dealing with Stop Systems and Trade Repair. I would also note that this week's edition of The Weekly Call is posted and that the model portfolio there is up 170% in the seven months to June 23rd, 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.

Friday, 14 July 2017

A Tale Of Two Bull Flags

SPX and NDX both delivered breakaway gaps up on Wednesday that were not filled. Both of the possible bull flags that I was looking at on SPX/ES and NDX/NQ as the lower probability alternate on Wednesday morning broke up, and SPX and ES have made the minimum bull flag targets at the full retests of their all time highs this morning. So what now?

This is a smaller but still significant inflection point here at the marginal new all time high on SPX/ES. The possible SPX daily RSI 5 buy signal that I was looking at on Wednesday morning fixed and has made target, and it's possible that SPX / ES will make marginal new highs here in the second highs of double tops. If so, ideally, there would be a pullback in this area and then marginal higher highs to set up a daily RSI 5 sell signal on SPX.

This would be that headfake possibility that I mentioned on Wednesday's post if we were to see a break up on Wednesday. That would generally involve a touch of the daily upper band, touched at the AM high today, and then a rejection there that would not need to be seen today back into the lower band. SPX daily chart:
There is support for this scenario on ES, with a decent quality rising wedge forming from the low this week, and since I capped this chart rising wedge resistance has been tested. Watching to see what happens here, but I'd note that ES is already on a 60min sell signal. ES Sep 60min chart:

The NDX bull flag has also broken up with a minimum target at a retest of the all time high of course, and the key question here is whether NDX is going to need to make that target. I'm considering an alternate scenario where the falling wedge flag evolves into a falling channel (also likely bull flag). If seen that would likely only defer that all time high retest or weeks rather than months though. There is a lot of hourly negative divergence on NDX here with both RSI 14 and RSI 5 sell signals brewing there. NDX 60min chart:
There is also already a 60min sell signal fixed on the NQ chart, suggesting that a retracement at least is close, even if the all time high retest follows that soon after. NQ Sep 60min chart:
Looking at our Big Five charts in the webinar at theartofchart.net last night we were both doubtful about an all time high retest on NDX here short term, but maybe. Time, and price of course, will tell. If you missed last night's webinar then you can see the recording posted on our July Free Webinars page. Everyone have a great weekend :-)

Wednesday, 12 July 2017

Breaking Down Is Hard To Do

Another week, another inflection point on indices, and after eleven days of compression we are likely to see a resolution up or down today and whichever way this resolves is likely to deliver a daily upper or lower band ride in the direction of the break. Today is a cycle trend day and the odds of seeing a full trend day in either direction are unusually high. We'll see how that goes. The setup favors downside resolution, but the day is starting with a spirited attempt at a break up. We'll see whether that lasts.

I'll start with NDX here as Nasdaq is still driving the equities bus, and on NDX there is a possible H&S right shoulder forming here that is currently overshooting the ideal right shoulder high, but not to an extent that weakens the setup. There is an alternate read that a bull flag forming wedge is forming here, and if that wedge resistance currently in the 5800 area is tested from here then that option becomes a lot more likely. If that bull flag wedge was then to break up the minimum target would be an all time high retest on NDX. NDX 60min chart:
NDX broke over the daily middle band yesterday and needs a confirming close above today to open a possible test of the daily upper band at 5827. If NDX were to get that far I'd be looking for an all time high retest as the highest probability option. NDX daily chart:
Daily middle band resistance has been solid resistance on SPX over the last few days but SPX has gapped over it this morning and is well on the way to the upper band in the 2450 area. This may be a breakaway gap up on SPX but the break needs to be sustained into the close and needs to be confirmed with another close over the middle band tomorrow unless the upper band is hit beforehand.  A breakaway gap is bullish as long as that gap is not filled. If it is filled then it becomes a likely failed break up and becomes bearish. SPX daily chart:
The ES, NQ and TF futures charts below were done 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.

On ES possible flag channel resistance has broken up and the minimum flag target would be at the all time high retest at 2452. There is an SPX version of this flag channel that has been established at the 2444.18 high this morning and would be breaking up at 2446. All time high retests likely at the stage IMO. ES Sep 60min chart:
On NQ the rising megaphone is no longer in play. Stan has key resistance at 5774 and I have flag channel resistance currently in the 5790 area. So far today NQ has been seriously underperforming ES and TF which may be significant. As I said, Nasdaq is driving this bus. NQ Sep 60min chart:
Whatever happens on TF for the rest of the day an all time high retest is likely.  TF Sep 60min chart:
An expansion is likely starting here and a daily band ride in one direction or the other is likely. This would often start with a headfake in the other direction and I'm wondering about that possibility here. We'll see. A sustained break in either direction may well run a while. If the obvious H&S setup on NQ resolves down and makes target that would be a decline of about 10% from here, so that would be a very serious move. We'll see how that goes today.

I have to be out most of the rest of the morning on offspring chauffering duties. Back lunchtime.

Stan and I are doing our monthly free public Big Five at theartofchart.net an hour after the close on Friday, and if you would like to attend then you can register for that on our July 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 170% in the seven months to June 23rd, 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, 6 July 2017

Inflection at 2400

SPX rejected from the backtest of the daily middle band yesterday and came close to a retest of last week's low at the intraday low today. There is a compelling case for seeing that full retest tomorrow as well as a retracement low retest on NQ and that the next important inflection point is there. I'll be looking at why that is below. SPX daily chart:
NDX is on the fifth day of a daily lower band ride and has backtested the broken H&S neckline. If NDX can deliver a sustained new low I'll be looking for the H&S target in the 5360 area. NDX daily chart:
The ES and NQ futures charts below were done before the RTH open for Daily Video Service subscribers at theartofchart.net, except for ES which was updated at about 11am. If you are interested in trying our services a 30 day free trial is available here.

So, the inflection point ..........

On ES I have a falling channel in purple trendlines, and the channel support trendline is now in the 2398/9 area, just above the 50% retracement of the rising wedge from the May low. If that trendline is tested and holds, then there would be a decent looking setup to head back to channel resistance, and with the low close to the 50% retrace target there would be an excellent case that the channel is a bull flag channel setting up a retest of the all time high, in a likely second high of a double top.

The bear option from the inflection point is that if that channel support trendline doesn't hold as support, then that same trendline also works as the neckline on a decently formed downsloping H&S, and on a sustained break below the H&S target would be in the 2355 area, though the obvious target by then would be a full retracement back into the May low at 2341. ES Sep 60min chart:
The bear option for NQ is already laid out on the NDX chart, but the bull option here is well worth a look. The short term falling wedge broke up slightly yesterday and there is therefore a good case that the retest of the current retracement low on NQ would be making the second low on a double bottom. That wedge is part of another falling channel that would not be a likely bull flag in this instance. A retest of the lows and rejection back up would set up a possible return to channel resistance, slightly over 5800. NQ Sep 60min chart:
TF looks as though a triangle is forming here. That leans weakly bullish and there is still potentially unfinished business at a dull retest of the all time high. TF Sep 60min chart:
I'm leaning strongly towards seeing ES and NQ retest their retracement lows tomorrow and make at least marginal new retracement lows. At that point price will need to make a decision. On a rejection back up there is still a good case to see full all time high retests on ES and TF, and potentially on NQ as well, though that is more of a stretch. On a sustained break below the current retracement lows, we should see a move to the next target areas below.

Stan and I did our monthly free public Chart Chat at theartofchart.net on Sunday and if you missed that you can see the recording posted on our July 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 170% in the seven months to June 23rd, 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.

Wednesday, 5 July 2017

Backtesting Resistance

I posted my premarket video on my twitter before the open today and if you missed that then you can see that here. I included charts on XLE and XLF today.

On SPX the daily middle band was backtested today and was respected. As long as that remains the case on a daily close basis then last week's low at 2405.70 should at minimum be retested soon. SPX daily chart:
NDX rallied almost to the backtest of broken H&S neckline support today. If NDX breaks higher into a retest of the daily middle band in the 5730 area then it might well then be forming the right shoulder on an alternate H&S. As long as that holds the next big downside target area is rising support from June 2016 in the 5410 area. NDX daily chart:
The ES and NQ futures charts below were done before the RTH open for Daily Video Service subscribers at theartofchart.net, and are the ones shown on the video linked in the first paragraph. If you are interested in trying our services a 30 day free trial is available here.

ES broke over declining resistance today and that opens a possible retest of the 2436/7 area, though I'm doubtful about that unless NQ needs to go higher. ES Sep 60min chart:
NQ may need to go higher, as falling wedge resistance broke at the highs today. This morning's 60min buy signal made target but the double top target in the 5680 area was not quite hit and may well be unfinished business for tonight or tomorrow. NQ Sep 60min chart:
TF didn't move much today. Clear support and resistance. Still wondering about that possible all time high retest. TF Sep 60min chart:
NQ and ES both have possible unfinished business above tomorrow morning. Tomorrow is a cycle trend day with 70% odds of being dominated by one side or the other. Historical stats for Thursday and Friday this week are mildly bullish tomorrow and neutral on Friday.

Stan and I did our monthly free public Chart Chat at theartofchart.net on Sunday and if you missed that you can see the recording posted on our July 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 170% in the seven months to June 23rd, 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.