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Tuesday 26 March 2019

Backtest Or Retest?

The first move down on equities has delivered nicely, and at this point the time has come for the rally that is in progress at the moment. Now on the bigger picture this is an inflection point test of trend resistance, and the alternate inflection point outcomes are either a failure at resistance into another leg downwards, or a break and conversion of resistance back to support, opening another retest of the all time high.

On SPX resistance is at the weekly pivot at 2820, supported by the key short term trend support/resistance levels at the 5dma, currently at 2820 and the 50 hour MA, currently at 2825. We should either see failure in this area, or a break back up into the high retest. I discuss the options on this morning's premarket video. Since then the 60min buy signals on ES, NQ and RTY have all either made target or the possible near miss target.

Full Premarket Video from theartofchart.net - Updates on ES, NQ, RTY, DAX, ESTX50, SPX, NDX, RUT, CL, NG, GC, SI, HG, ZB, KC, SB, CC, ZW, ZC, ZS, DX, EURUSD, USDJPY, USDCAD, AUDUSD:
On SPX there is a concerningly (for bears) solid looking low setup yesterday. There is an open double bottom target at 2835, not yet reached, and a decent quality overall rising channel from 2722 was established at yesterday's low, which also respected an important open breakaway gap from 2784, which obviously remains to be filled on another leg down. The hourly RSI 14 sell signal has not yet reached the possible near miss target, and there are still daily RSI 14 and RSI 5 sell signals on the ES chart. SPX 60min chart:
On NDX the obvious next target is rising wedge support, currently in the 7205 area, and that has not been reached. The hourly RSI 14 sell signal has also not yet made the possible near miss target and if we were to see a rally high retest from here I'd be leaning strongly towards that being the second high of a double top. NDX 60min chart:
The setup that should concern bears most here however is on RUT/RTY. On RUT there is a very decent looking falling wedge forming that might well be a bull flag. The wedge is a perfect flag channel on RTY (RUT futures) so they are telling the same story. There is an obvious setup to retest the rally high here on RUT and if that happens then I'd expect similar retests on SPX and NDX, and perhaps higher. RUT 60min chart:
Cycles aren't favoring the all time high retest here yet, but my monthly middle band stat is favoring seeing that retest this year. SPX is not far from the all time high though and every marginal higher high increases the chances that we might see that sooner than expected. We shall see. I'm estimating the odds of this just being a backtest at 70/30 in favor on the overall setup, but with a solid 30% chance of a break up into that rally high retest. If we see the next leg down I have the next serious possible support levels in the 2760 and 2720 areas.

Stan and I are doing a webinar tomorrow on setups and approaches to trading commodities. If you'd like to attend, you can register for that on our March Free Webinars page.

Friday 15 March 2019

So Here We Are Then

Last Friday I was saying that my preferred scenario on SPX would deliver a marginal new rally high to make the second high of a double top to then take SPX back into the 2600-50 area. We have seen that marginal higher high, the middle of this cycle high window is today, and the stats for next week lean significantly bearish. If everything keeps going to plan then SPX is about to reverse down here and this high may be the 2019 high, though I'm still wondering about a possible ATH retest after the next big low window in June.

There was a very nice setup for reversal across the board on indices this morning, but in my premarket video I was doubtful about those delivering anything today just because the stats for today are so historically bullish, and so it has turned out. Updates on five equity indices and seventeen other instruments on my premarket video from this morning.

As an aside, I was told a few weeks ago after posting one of videos these here that I tend to go pretty fast in these premarket recordings, and that's true, and that I should consider taking it a bit slower, which I won't, as it is fast for a good reason. I'm reviewing the salient trading setups on twenty two tickers in less than ten minutes every morning, and I don't like the videos to run over ten minutes because people are busy in the mornings. All the futures charts shown are also uploaded to the website for subscribers to review, and these videos are recorded for those subscribers rather than intended for general consumption. It's a compromise and, if I'm going too fast for you, please just use the pause button.

Full Premarket Video from theartofchart.net - Updates on ES, NQ, RTY, DAX, ESTX50, SPX, NDX, RUT, CL, NG, GC, SI, HG, ZB, KC, SB, CC, ZW, ZC, ZS, DX, EURUSD, USDJPY, USDCAD, AUDUSD:
There's now a high quality double top setup on SPX which on a sustained break back below 2722 would look for a target in the 2615 area. An encouraging possible hourly RSI 14 sell signal is brewing. I like a sustained reversal from this area.

SPX 60min chart:
On NDX the original rising wedge has expanded into a larger version of the same rising wedge and that has now delivered a slight bearish overthrow A classic bearish setup and another promising hourly RSI 14 sell signal is brewing. On NDX I also like a reversal from this area.

NDX 60min chart:
RUT has delivered a decent lower high. DAX has a solid double top setup and the ESTX50 setup is very similar to NDX, with the exception so far of the bearish overthrow. We might see marginal higher highs on all of these, but the topping setups look cooked and ready to deliver. Next week should be interesting.

Everyone have a great weekend. :-)

Tuesday 12 March 2019

Back On The Three Day Rule

I was looking at the likely reversal back up on Friday morning and obviously we have seen that and ES/SPX have broken back strongly over the multiple resistance levels in the 2660-70 area, weekly and monthly pivots, daily middle band 5dma and 50 hour MA. So now what?

Well in the short term a retracement seems likely and in my premarket video this morning at theartofchart.net I was projecting an ideal path of a higher high (over 2799 ES Jun) setting up a possible 60min sell signal on ES. Ideally ES would then retrace back to the monthly pivot at 2765 ES (2760 SPX) before either breaking back down through that into lower lows, or (more likely) finding support and retesting the rally highs in what would probably be the second high of a double top setting up a larger retracement into the low 2600s.

Here's how that short term divergence looks on the ES Jun 60min chart:
On the SPX hourly chart there is now a possible RSI 5 sell signal brewing.

SPX 60min chart:
That monthly pivot support on SPX / ES is a decent match with the SPX 5dma, now at 2768 and particularly important because the close back above the 5dma yesterday after the more than 2% decline has put SPX back on the Three Day Rule. On a close back below the 5dma today (extreme long shot) or tomorrow (potentially doable), I'd expect to see a retest of the low at 2722 before a retest of the rally high. We shall see.

SPX daily 5dma chart:
One other thing I mentioned in premarket video today was that in the event that NDX retested the rally high before the expected retracement here, that would set up a decent quality double top on NDX and increase the chance that a more significant lower high was being made on SPX here. NDX has retested the rally high now so that's worth noting too. Nonetheless I still think that a retracement and then higher high here are more likely than a break down directly.

NDX 60min chart:
Either way, SPX is likely in the process of forming a high that should at least deliver a backtest of the low 2600s, and I'm expecting the downtrend for that move to get going within a few days.

Friday 8 March 2019

Looking For This Retracement Low

Everything that I was looking at on Wednesday has delivered except that SPX has not quite yet reached the H&S target at 2720. The daily RSI 5/NYMO sell signal fixed and reached target, the hourly sell signals on SPX and RUT both made target, and while SPX might need another marginal lower low to reached that 2720 target, this is the right area to see this retracement low, and it could already be in. So what now?

Well there are two obvious options here assuming that the retracement low is being made in this area. I'd expect either option to be complete within two weeks and for a larger decline to follow.  My preferred option would be a retest of the rally high with a marginal higher high. My one reservation there is that the three highs resistance that I was looking at before the high was made never broke, with the current high at 2816.88 just 0.06 below the top of that resistance at 2816.94. That being the case there isn't much room for a higher high unless that resistance breaks.

The other option here is that an H&S is forming, and that a right shoulder will form here with an ideal right shoulder high in the monthly pivot area at 2760. Depending on the time taken to rally, that might well be a decent match with the 5dma, currently in the 2766 area, and the 50 hour MA, currently at 2776. Either option should yield a reversal pattern that would take SPX back into the 2600-50 area.

SPX 60min chart:
RUT has been leading the decline and may be leading on the rally as well. Worth noting that there are possible buy signals brewing on both RSI 14 and RSI 5, and that the current retracement low has established a decent quality rising channel that may be support on the next move up.

RUT 60min chart:
Everyone have a great weekend! :-)

Wednesday 6 March 2019

Watching SPX Monthly Pivot

I was looking at the topping setup here before the open, among other things. Full premarket video below including a very nice reversal setup on GC.

Full Premarket Video from theartofchart.net - Updates on ES, NQ, RTY, DAX, ESTX50, SPX, NDX, RUT, CL, NG, GC, SI, HG, ZB, KC, SB, CC, ZW, ZC, ZS, DX, EURUSD, USDJPY, USDCAD & AUDUSD:
On SPX there is an H&S formed that has completed forming since I capped this chart, though it has not yet broken down. What I was talking about in the video was the possibility that the H&S would break down with a target in the 2720 area, reaching an inflection point just above the monthly pivot at 2760, and rejecting from it into a retest of the rally high. Alternatively SPX breaks though 2760, converts it to resistance, and then continues down to the H&S target in the 2720 area.

SPX 60min chart:
Similar setup on on ES except that the H&S has already broken down slightly. 

ES Mar 60min chart:
On the daily chart the full RSI 5 / NYMO sell signal should fix today until there is a strong rejection back up today. That would favor the 2720 target. I would also note that the 200dma is now at 2738.

SPX daily chart:
Stan and I did our free public Chart Chat on Sunday and if you missed that, the recording is posted on our March Free Webinars page.

Friday 1 March 2019

Retest Interruptus

I was making the argument before the open this morning that equity indices were so close to obvious resistance on NQ, RTY, DAX and ESTX50, that ES might well deliver a lower high this morning and fail hard there. So far that has delivered though this morning's high might need a retest.

Premarket Video from theartofchart.net - Update on ES, NQ, RTY, DAX, ESTX50, SPX, NDX, RUT, CL, NG, GC, SI, HG, ZB, DX:
If this morning's high area holds, where might SPX be headed next? Well if a bull flag is forming here to set up a high retest before a larger retracement, then the obvious next target would be the 2760s, with some established support in the 2760 area and a possible flag support trendline in that area.

SPX 60min:
Could the retracement go further? Yes, I'm looking particularly at the H&S on RUT, with a target in the 1540 area on a break down. That could be a match with the ES/SPX target area though. Bigger picture the setups, particularly on DAX and ESTX50 are suggesting lower than these levels soon.

RUT 60min:
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! :-)