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Monday 31 December 2018

Goodbye To 2018

Stan and I did our end of year webinar yesterday looking at the outlook next year for equity markets including SPX, NDX, RUT, DAX & NIKK, also AMZN & AAPL, bonds, oil, gold, silver, gdx, us dollar, EURUSD, coffee, sugar, wheat, corn, bitcoin and a couple of other instruments we were asked about that I can't recall offhand. It is well worth watching and the recording is posted here. Our annual holiday sale on annual memberships also ends on Wednesday 2nd January and if you're interested, you can find the page for that here.

One of the things we were looking at was whether this current move down has been the first leg down in a bear market likely to extend well into 2019. Our feeling is that is most likely the case, but I was talking about the historical importance of the SPX monthly middle band in showing the nature of a move down. In the absence of something really unexpected SPX will break the monthly middle band, currently at 2651, with a lot of conviction at the close today and the last time that there was then a subsequent close significantly back over the middle band that didn't then deliver a new all time high before a lower low was in 1957, so that is the level that I'll be watching next year. If the monthly middle band is strong (monthly closing) resistance then we should see another leg down and we were talking about the targets for that. If SPX can deliver a closing break back over the monthly middle band then the odds will favor new all time highs, likely in 2019.

SPX monthly chart:
In the short term we are looking at the current move on SPX as a likely bear flag forming before at least a retest of the 2018 low. Ideally the high for this move would be in the 2550-70 area in the next week before a likely lower low with an ideal target at rising support from the 2011 low, currently in the 2300 area. After that we would be looking for a rally that should test the monthly middle band and either (preferred option) fail there into another leg down or break up into new all time highs. SPX 60min chart:
There is a very decent looking rising wedge forming on ES and I'm looking at the resistance trendline of that as key short term resistance on this rally. We could see a break down first to establish a less steep support trendline but if we see any sustained break below the weekly pivot at 2441 then I'd expect the low retest soon afterwards. ES Mar 60min chart:
Everyone have a great holiday tomorrow and a very Happy New Year in 2019 :-)

Friday 28 December 2018

Looking Into 2019

At the weekend in Chart Chat I was talking about the 2300-50 support area on SPX, and the current rally has started from there. That area is composed of the monthly lower band and the 200 week MA, both in the 2350 area, the 50 month MA at 2330, and rising megaphone support from the 2011 low now in the 2300 area. That is a formidable support area and, if broken, could open a direct move to the double top target area 2120-2200. If it holds that would be the obvious area to end the wave A move down from the high and start the wave B rally. If we see a retest of the lows after this rally ends then that could well be a double bottom setting up for the wave B rally. SPX weekly chart:
In the short term declining resistance from 2800 has been broken and SPX is consolidating above the 50 hour MA, currently at 2472. Obvious resistance above is at broken double top support at 2532, the annual pivot (until Monday close) at 2538, and the maximum level I am thinking this rally could reach, the daily middle band now at 2589 and declining at about ten handles per day. There is still an open hourly RSI 14 buy signal that is favoring at least somewhat higher. SPX 60min chart:
The short term pattern is unclear as yet but rising (likely bear flag) support is now in the 2415-20 area, with closer support at the 50 hour MA now at 2472. The 5dma is currently at 2444 and this is day three on the Three Day Rule, so a close below there today would be very bearish, but doesn't seem that likely at the moment. SPX 15min chart:
Once a year Stan and I do a free public Chart Chat at theartofchart.net looking at what might happen in the year ahead on the very wide range of indices, forex, cryptos, metals, and commodities that we cover. We are doing this years edition on Sunday and all are welcome. If you'd like to attend then you can register for that here. Just a reminder also that we are doing our holiday sale on annual subscriptions and that ends next week. If you'd like to take advantage of that the sale page is here. Everyone have a great weekend. :-)

Friday 21 December 2018

Big Support Breaks

After repeated tests where it held, the thrust down after the Fed hike on Wednesday broke down through the big support level and potential H&S neckline in the 2530-40 SPX area  and continued down. Wednesday night I was looking at the next big level on ES 2465-80 area and that too has broken yesterday. I'd be surprised not to see a strong counter-trend rally on SPX soon but it's getting harder to identify where the next decent support might be.

Short term though, the ES low yesterday was an exact test of the possible falling channel support trendline that I had drawn in on my ES chart and, as long as that trendline remains unbroken, the obvious next target within the channel would be a test of channel resistance, currently in the 2570 area.

ES Mar 60min chart:

There are some things to bear in mind here on the bigger picture. Firstly, in the event that 2530-40 SPX was not going to be an H&S neckline, then the alternative was that it was double top support. That support has now broken down with alternate targets at either the 2200 area or the 2120 area, and my working assumption is one or both of those levels will be tested in 2019 as this move plays out. Large H&S patterns have now also broken down on both NDX and RUT, following the very high quality H&S on DAX which I've been watching form for much of the year and which broke down first. 

I'd note possible support at rising megaphone support from the 2011 low is now in the 2300 area, and rising support from the 2009 low is now in the 2200 area, currently a decent match with that higher double top target. On a break below megaphone support in the 2300 area then I would be watching the 38.2% retracement of the move up from 2009 in the 2225 area, the 50% retracement of the megaphone in the 2000 area and the 61.8% retracement of the megaphone and the 50% retracement of the move up from 2009, both in the 1800 area. If we do see a decent rally start from the current area, which I'm thinking is likely, then an obvious target would be a backtest of the monthly middle band, now in the 2650 area. A weak rally would just be a backtest of broken double top support at 2532.

SPX monthly chart: 

Stan and I are doing our annual free public webinar looking at the year ahead at 5pm EST on Sunday 30th December. All are welcome and if you'd like to attend you can register for that here. We will be looking at the usual very wide range of markets including equity indices, bonds, forex, precious metals and commodities.

Our usual end of year sale on annual subscriptions has started and as well as the usual free two months discount on these subscriptions there is a further two months (20%) off through to January 2nd. Our price guarantee as always is that as long as any subscription is continuous the price will never be raised on any product for any current subscriber. The sale code is XMAS 20 and the subscription page is here.

I'll be working next week so there will likely be another post out before then. Until then though, everyone have a great Xmas/holiday. :-)

Richard Chappell aka Springheel Jack has been writing about equity, bonds, forex and commodity market at channelsandpatterns.net since 2010, and also at 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.

Friday 14 December 2018

Belt And Braces

SPX closed ten handles or so over the 5dma yesterday, so SPX is back on the Three Day Rule. If SPX should close back below the 5dma today or Monday then we should expect a retest of the last low at 2583.23 in the near future. At the moment the 5dma is at 2638 and SPX looks likely to close the day below it.

As it happens that would just confirm the bear flag rising wedge that has already broken down on ES with the same minimum target, so one way or the other that retest looks likely. At that point we could see the second low of a double bottom or continuation down towards the major support area below at 2530-40, the 2018 low and possible H&S neckline at 2532, and the annual pivot at 2538.

SPX 5dma chart:
ES Dec 60min chart:
Everyone have a great weekend. :-)

Monday 10 December 2018

First Break Under 2600

I had food poisoning for half of last week so I didn't manage to get a post out or remind everyone that Stan and I were doing our monthly public Chart Chat on Sunday. If you missed that the recording is posted here.

In the webinar yesterday we were looking at the likely triangle on ES/SPX and what would be likely to happen when that broke down, which it has with the move under 2600 this morning. What generally happens now is an initial break down, then a backtest back into the body of the triangle, likely in progress, and then a thrust down from the triangle, first working target mid to high 2400s though with very significant support at the annual pivot and 2018 low in the 2530-40 area where there is a possible large H&S neckline.

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: