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Wednesday, 27 February 2019

Topping Out ........ Probably

SPX and NDX reached the resistance areas that I was looking at and may be topping out there. the rising wedge support trendlines on SPX, NDX and RUT have all now broken down. So what now?

Well on SPX I have been watching three levels which are all currently in the same area. These are the SPX weekly pivot at 2784, the 50 hour MA now at 2787 and the 5dma now at 2790. What I was looking for this morning was a break down through these, which we saw, then a backtest into those as resistance which failed in that range. That we did not see, and I'm wondering whether we are going to see a high retest next to set up the second high of a small double top. SPX is still on a 60min RSI 14 sell signal with a possible daily RSI 5 sell signal brewing.

SPX 60min chart:
NDX has also found resistance so far in the range of the three rally highs late last year. Again I am wondering about a possible high retest from here. That would set up possible daily RSI 5 negative divergence and another possible small double top.

NDX 60min chart:
Of the three RUT was the only one to break the weekly pivot (1581) with any enthusiasm, and then reach a possible H&S neckline I'd been looking at in my charts for subscribers. An H&S right shoulder may well be forming there and, if so, that right shoulder would have an ideal right shoulder at the backtest of WP, though the equivalent target on RTY is a bit higher in the 1588 area. We may be forming that right shoulder now, and would likely only see the high retests on ES and NQ if that also breaks up into a rally high retest. RUT is also on an hourly RSI 14 sell signal and in this case weak RSI 14 and RSI 5 sell signals have already fixed, though a high retest could turn those into full signals.

RUT 60min chart:
Overall I'm looking for more retracement here, possibly after rally high retests, but my concern is that the timing cycles have this retracement low middle to end of next week, followed by a push up into the 20th March area. That's not a lot of time, and the more time is spent topping here then the more modest that retracement is likely to be. The more modest that retracement is, then the higher the chances that the March high will be the possible all time high retest that has been on my radar since SPX broke back over the monthly middle band at the end of January.

Stan and I are doing our monthly free public Chart Chat on Sunday, looking at the usual wide range of equity indices, forex, bonds, metals and commodities. If you'd like to attend you can register for that on our March Free Webinars page. Be there or be unaware! :-)

Thursday, 21 February 2019

SPX Rising Channel Support Broken

I was looking this morning at the decent looking possible rising wedge resistance trendline established on SPX at the highs this week and watching with great interest as rising channel and now possibly wedge support was tested again this morning. The trendline held on the first test and then broke on the second, so there has now been a significant technical break down, and the door is open for a possible significant retracement on SPX/ES. We shall see what develops.

In the short term there is an open 60min RSI 14 sell signal that fixed yesterday, the 50 hour MA is at 2763/4, tested and the low today, and short term daily close support/resistance is at 2771. If SPX is topping out short term that we may see a high retest to set up the topping pattern for a larger retracement.

SPX 60min chart:
NDX has also broken rising wedge support, yesterday in this case, but there is no open 60min sell signal there. No particular need to form a topping pattern on NDX of course, as NDX didn't break up with SPX and RUT last week.

NDX 60min chart:
On RUT there is a 60min RSI 14 sell signal fixed and trendline support is not yet broken. That is now in the 1562 area.

RUT 60min chart:
Stan and I are doing a free public webinar at theartofchart.net an hour after the close today on interesting setups on commodities this year looking at gold, silver, coffee, sugar and corn. If you'd like to attend you can register for that on the February Free Webinars page.

Tuesday, 19 February 2019

Fine Charts and Great Coffee

If you read my post on Friday talking about the rising channel on SPX that could deliver an all time high retest within weeks, then you know what I see as the key support level on SPX and that is of course that rising channel support trendline, now in the 2750 area and rising at about 42 handles per week. Until that breaks there's really not much to talk about on the short side on equity indices.

I would note the resistance area above that is the last really significant resistance area before a retest of the all time high. That area is the ceiling established by three rallies Oct-Nov last year and those three highs were all in the narrow range 2800-17. A break and conversion of that area clears the way for the possible all time high retest that may be coming soon, and SPX is now getting close to retesting 2800.

SPX 60min chart:
The rally on NDX has been more muted, and NDX is still trying to break over the 200dma, currently at 7055. I have NDX in a high quality rising wedge here, with wedge support now in the 7020 area and wedge resistance now in the 7210 area. The Oct-Nov three high resistance area on NDX is wider than the equivalent on SPX at 7107-7312 and, like SPX, NDX is also getting close to testing it.

NDX 60min chart:
The bull market on equities is rather long in the tooth though, and whatever happens here the upside from where we are now looks limited compared to other markets that have not been in a bull market for the last ten years. Stan and I are doing a webinar after the close on Thursday looking at the prospects across the many commodities markets we chart and there are some potentially very promising bull markets starting on several of those. One of the markets we will be looking at then is coffee.

Coffee has been in a long bear market from the 2001 high, and on the Bloomberg Coffee subindex shown below has lost about 85% from the bull market high to the possible bear market low we are looking at here. That's not untypical as a decline in this sector, sugar has declined just under 80% and wheat a bit more than 90%. We will be looking at those and others as well on Thursday.

In terms of coffee though, the recent low retest has set up some very decent positive RSI divergence on the monthly chart, and if support is found here then this is a strong candidate for the bear market low. I would draw your attention to the little double bottom setup highlighted in yellow on this chart before I move onto the next one.

BCOMKC monthly (Bloomberg Coffee Subindex):
JO is the Bloomberg ETN and while it is only just over a year old, it is the largest coffee ETF, and you can see has been tracking very well against the coffee index prices so far. On the JO daily chart the little double bottom setup highlighted on the chart above could have an entry here at 36 (and change), and would have a target in the 58 (and change) area. This is likely to be one of the most interesting trades of 2019-20 in my view, and the prospective returns obviously dwarf anything that can be easily envisaged on equities in that timeframe. JO daily:
This very interesting coffee setup is far from alone in the commodities sector and we will be looking at this and others in the free public webinar on Thursday. If you'd like to attend you can register for that on our February Free Webinars page here.

Friday, 15 February 2019

It Sounds Wild But ................

At the end of December I posted the SPX monthly chart for subscribers talking about the significance of the monthly middle band in bear market moves. I posted the chart on a post here on 24th January when it had become clear that such a close back above was possible, and we saw that close back above at the end of January. What I said in the notes on the chart below was that in the event that we were to see a clear monthly close back above the monthly middle band, then the last time that such a close failed to deliver a retest of the all time high before a significant lower low (under 2346) was in 1957. Obviously I am therefore now seriously considering the possibility that SPX may be on the way to a retest of the all time high, and given the overall setup that might well then be the second high of a major double top.

SPX monthly chart:
Now the rally since the late December low has already taken SPX up a very impressive 18%, and to extend that into a retest of the all time high would push that to over 25%. That would be an amazing move if we were to see that retest soon, and historical examples of that are limited, but fast high retests aren't unknown and there is a very decent example of a retest of a high to make a double top at the 2007 high, and that high retest was a 15% rally in two months. That's not a comparison that would be too far away from an ATH  retest here. .

SPX daily chart 2007 double-top:
On the daily chart SPX found some resistance at the 200dma and the 50 week moving average, but SPX has broken above both and looks as though it may be going higher. That brings an interesting possibility that I had been considering as a low probability into higher relief and I want to flag that as a possible path now, so I'll be looking at that in detail on the hourly chart:

SPX daily chart:
Early this week I noticed that last week's low at 2681 had established a rising channel from the December low. I wasn't thinking that channel would be likely to hold through this week but I was mentioning it to subscribers as the key support level that needed to be broken on the expected retracement to kill off the possibility that SPX might be starting a move towards wedge or channel resistance on the chart. Obviously that support trendline has not broken this week and both need to be considered now as potential targets.

The main rising channel is rising at 42 handles or so every week and the all time high could be reached within the channel before the end of February. Rising channel support is closing this week in the 2740 area, that will be at 2782ish at the end of next week, and 2825ish at the close on March 1st. That is obviously a very steep rate of increase, but equally that is a bit less than the average weekly rise since the rally started and, having come this far, it could still extend further after this week's break over the important resistance levels at the 200dma and 50 week MA. The two resistance trendlines shown are the obvious rising wedge resistance option, currently in the 2810 area and due to reach the 2840 area by the end of next week, and the rising channel resistance option, currently in the 2890 area and due to reach the 2930s by the end of next week.

As long as there is no break of rising channel support, then those are the obvious trendline resistance options. There is a lot of negative RSI divergence here, and the channel could break down at any time, and would break down if SPX just stopped here at 2770 for a week, but if it doesn't break down then those targets are on the table and an all time high retest could be seen within two or three weeks. In the absence of a break below channel support that trendline would be above the all time high by the end of March. Food for thought.

SPX 60min chart:
Everyone have a great weekend. :-)

Thursday, 7 February 2019

Reversing At SPX 200dma ..... So Far

My apologies for the lack of an update last week, which was particularly busy. Today I'm going to do a multi-timeframe review of where SPX is now, and the implications longer term of this seven week uptrend having risen this far.

Just to mention, we are doing our monthly free public Chart Chat on Sunday, and if you'd like to attend, you can register for that on our February Free Webinars page. We are also starting our next four week Trader's Boot Camp on February 18th and if you're interested you can register for that on our Trader's Boot Camp February page, though we do charge a modest fee for that of course.

One thing I was talking about was the importance of the monthly close in January relative to the monthly middle band. Historically this has been very important resistance after a serious bear move has started, and since 1957 every clear monthly close back above the monthly middle band at this stage has always delivered a retest of the all time high before any serious lower lows were made. We saw that clear monthly close back above that monthly middle band at the end of January. That high retest has sometimes made the second high of a large double top of course, although on many occasions that has been the start of a new leg up.

On caveat here is that Stan is of the view that the nature of the market may have changed since the 2009 in that Fed interventions in the market have since been frequent. I'm keeping an open mind but respecting this statistic until demonstrated otherwise.

What I would add though is that the most bullish thing that we could see here IMO on the bigger picture would be a retest of the December low into a test of the rising support trendline from the 2011 low. If that trendline held the next obvious target would then become the corresponding rising megaphone resistance trendline, currently in the 3150 - 3200 area and obviously rising. Food for thought.

SPX monthly chart:
On the weekly chart the key resistance level here is the weekly middle band in the 2730 area. You can see from the chart comments last week on the weekly and daily charts that I was flagging the weekly middle band and 200dma (2740 area) as the next big resistance area, and these are holding so far.

SPX weekly chart:
On the daily chart the high this week was a couple of handles below the 200dma and this should be at least a decent retracement starting here. On the daily RSI the daily RSI 14 buy signal has now reached the possible near miss target, and there is a strong possible RSI 5 / NYMO sell signal that may fix at the close today, depending on whether we see a rally into that close. If so, that should confirm the short term high here.

SPX daily chart:
On the hourly chart a decent quality rising wedge has broken down today. Subject to a topping pattern forming here and continued failure at the 200dma, I'd expect to see at least a 38.2% fib retracement into the 2588 area at this point with the obvious other target areas being the 50% at 2542, the 61.8% at 2496, and the full retracement of the wedge back to 2346. For that last option, a retest that tested and held the rising support trendline from the 2011 low not far below could deliver an impressively bullish scenario for 2019.

SPX 60min chart:
I'm planning another post tomorrow taking a broader view, but that's a thorough snapshot of where I see SPX being here and now. Until tomorrow.