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Monday 31 July 2017

The Future Is Always Uncertain

I posted the premarket video I did today for Daily Video Service subscribers at theartofchart.net on my twitter before the open today, and if you missed that you can see that here. I try to post one of these here a week as it also gives updates on the futures for USD, oil, nat gas, gold, 30yr treasuries, copper, coffee, sugar, cocoa and wheat as well as the usual ES, NQ & TF.

I did the SPX & RUT charts below on Saturday so they don't include the action from this morning so far. I'll be adding update notes to cover the action so far today.

On RUT I was looking at the low last week at short term rising wedge support. While that support was holding an all time high retest was very much on the table. That has broken this morning and that opens a high probability double top target in the 1410 area, and a target within the larger channel at channel support, currently in the 1373 area. RUT 60min chart:
On the (not necessarily safe) assumption that we are looking at the start of a significant reversal on equities here, there is an obvious path for SPX to follow for the next couple of months. It may go another way, but I draw these out once in a while and they regularly then play out on minor variants of the expected path. They often go another way entirely of course, but if this retracement is going to happen, then this would be the obvious way for it to develop. This is a nested H&S setup and it works well with the established price and fibonacci levels. SPX 60min chart:
The daily chart is more speculative, because unless this happens faster than expected, cycles are telling us that the final push down is unlikely, so this is a bearish alternate scenario. I've drawn it in because if cycles leaned bearish for longer, then this would be the obvious path to deliver a 50% retracement of the rising wedge from the Feb 2016 low.  With cycles being as they are this might still play out but with a double top delivering the final move rather than the H&S marked as the main scenario. SPX daily chart:
The ES, NQ and TF futures charts below were done an hour 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 and NQ the start of this week is all about whether the new weekly pivots are established as support or resistance. Support leans towards all time high retests, likely second highs of double tops to take them lower afterwards. The new weekly pivot on ES is at 2469.50. ES Sep 60min chart:
The new weekly pivot on NQ is at 5917.75. NQ Sep 60min chart:
On TF the H&S has broken down with a target at 1395. TF Sep 60min chart:
Why the title today? Well one thing I notice is that people are always looking for certainty, and as I've said before many time, there is simply no such thing in the markets, and not much in the world outside the markets either. Everything in market analysis is just probabilities, and it's very important to remember that. I (here) or Stan and I (at theartofchart.net) have forecast some remarkable things in the past that delivered, and doubtless I/we will do so in the future as well. Did I/we know what was going to happen? Never, it's always just applied math and probabilities. Nobody ever knows anything for sure.

The other thing I'd note again here is that bull and bear views are mainly just a matter of timeframe. In the really long term the bulls always win, and while in the short term looking for a possible retracement back to 2150 will be seen by many as bearish, on the longer term view 50% retracements are generally seen as bullish, often forming bull flags during those retracements. If we see that retracement then most likely new all time highs would be the next stop, so how bearish would that really be? 50% retracements in bull flags set up classic buy entries. People always need to remember the longer view. Markets advance and retrace, it's always just a matter of where and when.

Stan and I are doing our monthly free public Chart Chat at theartofchart.net at 4pm EST on Sunday, and if you would like to see that you can register on our August Free Webinars page. This week's edition of The Weekly Call is posted and 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.

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