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Thursday, 29 November 2018

Phase Changes

At the open this morning there was a key common thread on SPX, NDX and RUT, in that all three were either close (SPX & NDX), or at (RUT) their key resistance trendlines from the all time highs. As I've been writing the falling channel resistance on SPX and falling wedge resistance on NDX have both broken, with RUT having already broken up earlier today.

What this means is that this move is entering a new phase, either setting retests of the all time highs or signalling retracement and consolidation before the next move down. The more obvious move is retracement and consolidation but we could see the high retests, and I'd note that the seasonality favors the bulls into late December, and that while all the hourly RSI 14 buy signals made target yesterday, the daily RSI 14 buy signals on SPX, NDX and RUT are still nowhere near target.

On NDX the obvious retracement targets would be one of the 50% or 61.8% targets in the 7070 or 7220 areas respectively. On SPX there is a potential bear flag channel here for which the obvious next target would be in the 2840-50 area, though it remains to be seen whether SPX can break back over strong resistance in the 2815 area. We shall see. In the the short term possible hourly sell signals are now brewing across the board, and the next step may well be to backtest this break up from yesterday morning.

SPX 60min chart:
NDX 60min chart:
Richard Chappell aka Springheel Jack has been writing about equity, bonds, forex and commodity market at channelsandpatterns.net since 2010, and also theartofchart.net since 2015. He is co-founder of theartofchart.net,  producing charts and videos every day for subscribers there, as well as numerous charts and videos for wider audiences.

Wednesday, 21 November 2018

The Road Less Travelled

The bull scenario initially looked good after my post last week, with clear breaks back over the daily middle band and 5dma on Friday. That triggered the 5dma Three Day Rule, which on a daily close back below the 5dma on Mon day or Tuesday would look for a retest of the most recent low. SPX then broke back below the daily middle band and 5dma at the close on Monday, and retested the 2670 low on Tuesday.

Now I was saying last week that the alternate bear scenario would look for a retest of the main retracement low at 2603.54 SPX. We have not yet seen that full test, but after the current rally, it's likely that we will see that test. At that test SPX either finds support there on a marginal lower low, or extends lower to the 2018 low & annual pivot area 2530-40.

In the short term SPX is rallying on hourly RSI 14 and RSI 5 buy signals, and is trying to break up from a small double bottom. On a hard fail here SPX should return to retest yesterday's low, on a conversion of 2671 to support the double bottom target would be in the 2709 area, the falling channel resistance currently in the 2713 area, and important resistance on the way is at the 5dma now at 2693 (daily closing resistance only) and the 50 hour MA now at 2702.

At a fail either near here or at channel resistance the obvious next target would be a retest of the 2603 low, most likely on Friday or next Monday, and the next inflection point would be there. On a break and conversion of 2720 to support the next rally would have started unexpectedly early. Whether or not the likely low latest by the middle of next week was in the 2600 or 2530-40 area, I'd be expecting at least a sideways to up consolidation into Xmas, and if the low was in the 2530-40 area, then the ideal subsequent rally target would be a larger H&S right shoulder high in the 2870 area.

We are running our yearly Black Friday (period) sale on annual subscriptions, and if you are interested you can find that here. Everyone have a great Thanksgiving! :-)

Full Premarket Video from theartofchart.net - Update on ES, NQ, SPX, NDX, RUT, CL, NG, GC, SI, HG, ZB, KC, SB, CC, ZW, ZC, ZS, DX:
SPX 60min chart:

Thursday, 15 November 2018

Santa's Inflection Point

On my last post I was talking about the expected significant backtest on SPX, and we have now seen that retracement which has reached the 61.8% fib retrace area. At this point I'm expecting the main rally into Xmas to start in the next couple of days and that may well be starting here. However ........

I did mention in my last post that this retracement might extend lower into a full retest of the October low, and there is a possible setup to deliver that in this inflection point. That bear case rests on a decent quality H&S that has formed and broken down on ES with a target at that retest of the late October low, with a perfect backtest of the broken neckline in the 2717/8 area overnight. The original IHS on SPX looking for the 2910 has failed and this delivers a possible Janus Flag target at a retest of the prior low in the 2600 area. A sustained break below 2660 likely seals the deal for bears.

The bull case is that this is also what I would call a Janus Flag, in that it looks like a topping pattern that breaks down and rejects hard into the preceding high (2815 area). That case is backed up by the decent quality falling megaphone that has formed from the high and would obviously need some confirmation from breaks of upside resistance. The important upside levels on ES area possible double bottom support at 2718, and a sustained break above looks for the 2760 area. Falling megaphone resistance is in the 2730 area and a break above likely seals the deal for bulls.

Important resistance on SPX is at declining resistance in the 2720 area, the 5dma and the daily middle band, both in the 2726/7 area, with the 50 hour MA currently well above keys areas at 2757.

We are expecting a rally into Xmas to start shortly and there is a LOT of positive RSI divergence here over multiple timeframes, including the open daily RSI 14 buy signals that fixed on the last move up. The obvious path on the overall setup is a break up into that rally directly from here, but I'll be keeping an eye on the alternate bearish scenario which is a solid pattern setup as good as the bullish pattern setup but less likely due to other factors such as cycles. If the rally does start here then the obvious target area into Xmas for me would be in the 2850-2900 area. Whatever happens the next big target should either be a retest of the late October low or the November high. The odds of staying in the 2700 area are low.

Full Premarket Video from theartofchart.net - Update on ES, NQ, SPX, NDX, RUT, CL, NG, GC, SI, HG, ZB, KC, SB, CC, ZW, ZC, ZS, DX:
ES Dec 60min chart: 

Wednesday, 7 November 2018

Rallying Into FOMC

Last week I was talking about a backtest into the 5dma / 50 hour MA support area and we saw that, and another leg up over the daily middle band and the 50% retracement level that brings SPX up into resistance at the 61.8% retracement level at 2812 and the September rally high at 2816.94. I have a decent looking rising wedge from the low that has slightly overthrown wedge resistance and a lot of negative divergence on the 15min chart particularly. SPX 15min chart:
So what next? SPX is at significant resistance here, with the next level up over that resistance at the 50dma in the 2835 area. These are both significant resistance and either may well hold. I'd note though that if we were to see a serious break up over the 50dma, then I have marked up a possible IHS that has formed and broken up today with a target in the 2910 area. If SPX should spend any significant time over 2850, then that 2910 would be a credible target.

On the big picture we are likely soon to see a significant backtest on SPX, and that may extend lower into a full retest of the October low. If seen that may extend further into a retest of the 2018 low at 2532.69. Alternatively we might just see a partial retracement of the rally so far, and whichever way that goes we should then see a choppy sideways to up market into January. After that we should expect another big leg down and depending how that goes, 2019 may be a flat or red year like 2011 or 2015.  SPX 60min chart: