- WE'RE JUST RANDOM SPECKS OF DUST IN A TORNADO TO THE MARKETS .......
- CHARTISTS MUST PUT ALL BIAS ASIDE AND LET THE CHARTS DO THE TALKING OR WE'LL SEE ONLY WHAT WE WANT TO SEE
- This blog has a copy of all header posts that I publish anywhere, so that those interested in seeing what my thoughts are on the markets can find them easily.
- I will be answering questions and responding to comments, so feel free to respond to any posts and I will see your comment even if it is not on the most recent post.
- If you're interested in seeing any intraday charts I post, I do that on twitter, and my twitter handle is @shjackcharts.
- The charts in the posts are as large as I can practically make them. if you would like to look at one more closely, click on it, and the link will take you to a larger version at screencast. If you click on that again, you will get a full page version, and can use the resizing function on your browser to enlarge parts of interest further.

Monday, 12 April 2021

Three Taps and A Punch

 After my post on Friday, SPX spiked up into the trendline I had posted on the SPX hourly chart, and that was the very nice rising wedge resistance trendline from the March 2020 low. That high was retested this morning, the level was respected and weak hourly RSI 14 and RSI 5 sell signals have now fixed.

SPX 60min 15Mo chart:

Looking through my other charts on Saturday though that was only part of the story. Friday's high on SPX was also a perfect hit on a shorter term rising wedge from the late October low.

SPX 60min 5Mo chart:

That still wasn't all though. Looking at the SPX 15min chart that high was also a perfect hit on the ideal rising wedge resistance trendline from the late April low at 3853.50, so that was three intersecting trendlines on three rising wedges on SPX nested within each other like matryoshka dolls.

Is this a setup where I would be expecting those trendlines to hold as resistance into a retracement starting here? Generally yes, though there are no certainties in analysis, or trading, or indeed in the world in general.

SPX 15min chart:

Backing up the trendlines was the strong punch above the weekly upper band at Friday's close. This generally delivers (70%)+ in last 15 years, a short term high with at least a consolidation lasting several weeks and often a retracement to the weekly middle band, currently 3850 area, or lower band, currently 3600 area.

SPX weekly chart:

Since I capped these charts the smallest SPX wedge has starting breaking down and sell signals have now fixed on both the hourly and 15min charts. A small double top has formed with on a sustained break below 4114 SPX would look for the 4099 area.

I forgot to mention on Friday that we were doing our monthly free public Chart Chat at theartofchart.net yesterday If you'd like to see that the recording is posted on our April Free Webinars page, close to the top of the page.

We are also doing a free webinar an hour after the close on Friday on 'Trading Commodities - Setups And Approaches'. If you'd like to attend you can register for that here.

I'm going to try to get back into a routine of doing two or three posts a week so I'm expecting to publish at least one more post by Friday.

Friday, 9 April 2021

Cloudbusting

 I've dropped out of sight for a while, apart from my usual work at theartofchart.net, and my apologies for that. My divorce has been playing out in the background and I've been finding that rather depressing. Hopefully in a few months it will be finished and I will be free to move on to a better future, but in the meantime it is heavy going.

I do love writing these posts though and at the very minimum it is good for me to be writing them, so I am making an effort to restart doing these often, and today is a very good day to restart.

Why is that? Well after this impressive move up over 4000 on SPX, breaking the very nice looking topping setup that had been developing below under that obvious resistance, the market could use a retracement and all the indications are that we are about to see that.

Will that be part of a larger high forming here? Who can say? The Fed isn't really pumping money in any more, but the federal government has been passing some eye-wateringly huge spending bills with more and larger ones apparently on the way. I've always wondered what it might cost if every politician was able to fund every pork project they had ever wanted, and it seems possible that within a year or two we may know the answer to that question. We'll see. In the meantime the flood of spending may push markets ever higher, and 4000 SPX could now convert into a support level. If so, the likely retracement that looks imminent here may deliver the next decent buying opportunity.

What am I seeing that is suggesting imminent retracement on the SPX chart? Well the first reason is that I drew in the next two obvious resistance trendline candidates on SPX last weekend and SPX broke over the first. The second I have in the 4115 area and I think there is a good chance that it will hold in the short term at least. The second reason is the very high quality negative divergence on the hourly RSI 14 that has formed as we have neared that target. There are a lot of those, over a lot of instruments and indices, and these appearing in significant numbers usually indicates at least a short term high, though the lack of any matching daily negative divergence also suggests strongly that these highs will be at least retested within weeks.

SPX 60min chart:

On the daily chart SPX has essentially spent the entire week about the 2sd upper band. That is very stretched. That doesn't have to end here, but with the levels and negative divergence there is a pretty decent chance that SPX will retreat back below it shortly.

There is an obvious target for that retracement of course, and that target is at a retest of the daily middle band. At the time of writing the SPX daily middle band is at 3988 and rising, so that retracement would likely be looking for a backtest of broken resistance in the 4000 area, and my lean at this stage would be that support would likely be found there.

SPX daily chart:

On NDX the main target is likely to be the retest of the 2020 high, and that target hasn't quite been reached, but the hourly negative divergence is strong, and when I was looking this morning at the usual large tech stocks I follow, AAPL, AMZN, FB, GOOG, NFLX & TSLA, the only one that didn't have a high quality hourly RSI 14 sell signal brewing was TSLA, where it had already fixed. This is something that I don't see to often, and is a strong indicator of an imminent short term high. 

NDX 60min chart:

On the NDX weekly chart there is an obvious potential topping setup forming here, and a retest of the high may be the second high of a double top. I would note the weekly RSI 14 and RSI 5 sell signals that have fixed, so is that potential here, but we'll have to see how that develops.

NDX weekly chart:

I'm hoping to manage a couple of posts next week and I'm planning for one of those to look at the long case for precious metals, which is looking compelling here in my view.

Everyone have a great weekend. :-)

Friday, 26 February 2021

Likely Bull Flags Forming

 My last post was a couple of weeks ago now and in that time the retracement that I was expecting has been playing out, though the main target, rising support from the March low, now in the 3745 area, has not yet been tested, and may well not be before we see a high retest.

Why is that? Well the patterns forming here look like bear flags, and while the low this morning overshot my ideal bull flag channel support on SPX by five handles or so, the action today has only strengthened the case that the next move is likely to be a retest of the all time high on SPX.

Before the open this morning I was noting that hourly buy signals had fixed on ES, RTH and YM, and since then hourly RSI 5 buy signals have fixed on SPX and IWM, with another brewing on INDU. There is a lot of upward pressure building here, and as well as the clear bull flag , the retracements so far on RTY, DAX & ESTX50 all also have the look of bull flags forming.

I was also noting this morning that today is the last trading day of February, which leans about 67% bearish historically. The first day of March leans about the same distance to the bull side, so I was suggesting before the open that ideally there would be a low made in the 3790 ES area today before a move started, boosted by the bullish stats on Monday, that might well deliver the all time high retest. The low was at 3784 ES, which was a shade low, but so far I've seen nothing to change that view.

I was saying a couple of weeks ago that while equities have clearly been in a strong bull trend, trendlines and patterns have still been working well. I think my point has been made since then, and I'd particularly note the lovely H&S that formed on SPX and set up the first move to the 3800 area, which I called in my premarket videos as the obvious path down early last week. If I have time I'm going to be extracting that section and posting it as a particularly nice call.

SPX 60min 4Mo chart:

On this larger timeframe SPX hourly chart you can see that rising wedge support from the March low is now in the 3745 area. In the event that we do see more downside short term then that would be the obvious next target, though as I said, the setup here favors bull flags forming, so we may well see that all time high retest first.

SPX 60min 14Mo chart:

On the SPX daily chart, if we are going to rally from here, the next step would be a close back over the daily middle band, currently 3876 area and supported as resistance by the 5dma in the same area, and the 50 hour MA now at 3882. Once these levels have been broken (daily close basis), and converted to support, a break of the bull flag resistance on SPX should deliver an all time high retest.

SPX Daily chart:

We are doing our monthly public Big Five and Sectors webinar at 5pm EDT On tonight so if you'd like to attend you can sign up for that directly here, or from our February Free Webinars page.

Everyone have a great weekend. :-)

Tuesday, 2 February 2021

So Here We Are Then - SPX Update

 Firstly my apology for the lack of an update last week. As I've mentioned, I'm negotiating my way through a difficult divorce at the moment, and some weeks are harder than others. On the harder weeks I struggle to get any posts done. As the weeks and months pass everything should be resolved and I can just move on and I'm really looking forward to that.

So what has happened since my last post? Well I noted wryly that I lost several twitter followers as soon as I published my last post, and I assume that was because I was looking for a support break and retracement on SPX, and that is exactly what we have seen. I think that the low we have just made is what I would call 'the low before the high', just a sort of stretching of recently unused muscles before a larger retracement gets going, and I'll be looking at possible targets for that retracement in my next post.

In the meantime SPX closed below the daily middle band for the first time since early November, then backtested it as resistance and made a lower low before breaking back above it today. I'm expecting a close above the daily middle band (currently 3795 SPX area) today and there is a strong setup here for a full retest of the all time high next. The daily RSI 5 sell signal in my last post made target, a weak daily RSI 14 sell signal has now also fixed and on the bull side, a daily RSI 5 buy signal should fix at the close today and may reach target.

SPX daily chart:

On the SPX hourly chart the rising wedge from the late October low has broken down and the next obvious trendline target is rising wedge support from the March low, currently in the 3650 area. We will likely retest the all time high before we see that tested, though I do have an alternate scenario where we see a lower high here and then a lower low before that high retest, and I'll be looking at that on the next chart:

SPX 60min chart:

On the 15min chart below you can see the strong break of the rising wedge from the late October low and the modest retracement of that that was likely completed on Friday. A falling megaphone formed from the high that is a likely bull flag and that broke up at the open this morning with a minimum target at a retest of the all time high.

There is a possibility too though that a larger bull flag may be forming and SPX might break down into a lower low before that all time high retest. If so the ideal target for that lower low would be the red dotted trendline that I have drawn in, declining gently and currently in the 3675 area.

SPX 15min chart:

In the short term SPX has established two rising channels from the current retracement low at today's high, and a 5min RSI 14 sell signal has fixed today. These tend to deliver and you can see six of these on the chart over the last two weeks and all of them made target. What I'm expecting to see here is a retracement over the next trading day or so that would likely break the smaller channel support and test the larger channel support, currently in the 3793 area but rising about 45 handles per day, so if we are going to see a retracement, I'd be looking for that low tomorrow lunchtime at the latest really. If that channel support trendline holds then the next obvious target would be the all time high retest, at which point I would be looking seriously for signs of the next short term high.

SPX 5min chart:

A couple of announcements today. The first is that we are offering a free week at theartofchart.net on our Vega Options service so if you are interested you should check that out here. The second is that we are doing our monthly public Chart Chat at 4pm EDT On Sunday so if you'd like to attend you can sign up for that directly here, or from our February Free Webinars page.

I'm planning my next post on Thursday but if tomorrow is interesting enough I might bring that forward.

Thursday, 21 January 2021

Hitting Wedge Resistance

I was saying in my last post on Friday afternoon that the low made that day looked nice, with touches of the daily middle band and shorter term (from Nov low) rising wedge support on SPX. I was leaning towards seeing a retest of the all time high, which we have seen and more.

Now the rising wedge support touch on Friday was confirmation that the obvious rising wedge resistance trendline was the obvious target on a break up to a higher high with any confidence, and that was tested in the last hour yesterday, and then retested at the high this morning. That second retest held the resistance trendline again and SPX reversed on a high quality 15min RSI 14 sell signal:

SPX 15min chart:

Is anything missing from a topping setup here that I would like to see? Yes, as I would like to see clear negative divergence on the hourly RSI 14 . That can be done with a retest of the a new all time high established on SPX today and at the time of writing it looks as though that may happen in the next few minutes.

If we see the reversal here the first obvious target would be this rising wedge support, now in the 3785-90 area. On a break below, main rising wedge support is now in the 3590 area.

SPX 60min chart:

The biggest support level here is the daily middle band, now in the 3765 area, and there has not been a daily close below that since early November. If we are to see a mean reversion to the 45dma, now at 3696, or main rising wedge support in the 3590 area, the we need to see a daily close below the daily middle band as the first step, and then conversion of that level into resistance. A weak daily RSI 14 sell signal is now brewing.

SPX daily chart:

We are have started the year's first Trader Boot Camp at theartofchart.net on 18th January and this is extremely competitively priced and covers a lot of territory. It isn't too late to join and if you are interested then you can read more about that here.

Stan and I are doing our monthly free webinar on the Big 5 & key sectors tonight an hour after the close today and if you are interested in seeing that you can register for that here, or from our January Free Webinars page.

Stan and I were doing a free webinar an hour after the close last Friday at theartofchart.net looking at interesting trades on commodities using (mainly) options strategies, but that had to be delayed a week as Stan's wife fell and broke a bone so if you'd like to attend that an hour after the close tomorrow then you can register for that here.

On SPX this is really a very nice setup for reversal as soon as we see the all time high retest. Pretty decent even without that. Could price just bulldoze higher anyway? Sure, any setup can fail, however nice, but I'm looking for at least a decent retracement here back into wedge support now in the 3785-90 area. We'll see if we get that.

Friday, 15 January 2021

Support Test and Inflection Point

The research I am doing on the 45dma over the last 25 years is a bigger job than I expected so I should have the post out on that next week.

In the short term though, equity indices have been looking pretty interesting and and are at a significant short term inflection point here. The first part of that is that the daily middle band was tested on SPX at the current low today, and that is the key short term support level. There have been a couple of breaks below that in the last few weeks but there has been no daily close below it since SPX broke back over it in early November. If seen, a clear daily close below it would be a significant technical break. Without that break, a retest of the current all time high would be the obvious next target.

SPX daily chart:

If we were to see a break below the daily middle band then the obvious next target would be the mean reversion to the 45dma, currently at 3684. That is a significant level for other reasons that I will be coming to further down.

SPX daily 45dma chart:

On the SPX hourly chart we are seeing a test of short term rising support, which I'll be looking at in more detail on the 15min chart below, and a break below would open a possible test of rising wedge support from the March low, currently in the 3570 area, and that would be the obvious next target on a break and conversion of the 45dma to resistance.

SPX 60min chart:

The SPX 15min chart shows the short term pattern setup here very well. You can see that the low today delivered a perfect test of the smaller rising wedge support from the early November low. You can also see that there is a part formed H&S that on a sustained break below 3750 would look for the 3670 area, not far below the 45dma level. If SPX continues back up here then an obvious target would be wedge resistance, now in the 3845 area.

Shoutout to my friend Suz Buckles who spotted the part formed H&S. Many trained eyes make light work. :-)

SPX 15min chart:

Looking at the NDX 15min chart there is a strong pointer towards a break up from this inflection point as while that wedge from the early November low has broken down, the pattern from the current high is a very well formed bull flag falling wedge, so I think the short term odds favor a break up into all time high retests.

NDX 15min chart:

If we do see that break up into all time high retests, what then?

Well there's a very interesting analog that I spotted on the SPX 1min chart on Wednesday and have been following since. I was noting on my premarket video at theartofchart.net yesterday morning that the rising wedge there was very similar in form to the rising wedge from the March low, and that patterns on every timeframe are the same, just obviously playing out a lot faster on shorter timeframes. I also noted that the wedge had overthrown so in exactly the same way as the hourly wedge, with a break over wedge resistance, a backtest of broken wedge resistance and then a lower high, and wondered if we might see the same on SPX on the larger wedge yesterday, which we did.

The 1min wedge then broke wedge support, retested the high, formed an H&S, made the H&S target and retraced the full rising wedge and more. That may or may not happen on the larger wedge but this is a good example of how a decent quality rising wedge behaves, with the proviso that these deliver fibonacci retracements in the 38.2% to 61.8% range when these form as continuation rather than termination patterns, and it is not yet clear which of those the larger rising wedge from the March low is, though it is very likely to be either one or the other.

SPX 1min chart:

The jobs and retail data this week was grim, which was not unexpected, and Joe Biden announced his intention to add $1.9 trillion of stimulus after his inauguration, which didn't have any significant impact on SPX, which was both unexpected and very interesting. Perhaps the flood of liquidity and stimulus is no longer having the impact that it has been having to date. If so, we could finally be topping out for at least a decent retracement here, which is certainly what the pattern setup is strongly suggesting.

In the short term though, on this pattern setup I'd give 60% odds of a retest of the all time highs from this inflection point on SPX and NDX. If we see a break down instead then the obvious main target below would be in the 3570-3600 area. If seen we might well still see a retest of the all time high from there as part of a larger topping process.

We are running our next Trader Boot Camp at theartofchart.net starting 18th January and this is extremely competitively priced and covers a lot of territory. If you're interested you can read more about that here.

Stan and I did two public webinars at the end of December looking at prospects across a wide range of markets and you can see both of those posted on our December Free Webinars page. We also did our free monthly Chart Chart on Sunday and if you would like to see that, it is posted on our January Free Webinars page.

Stan and I are doing a free webinar tonight at theartofchart.net and that is looking at interesting trades on commodities using (mainly) options strategies. If you'd like to attend you can register for that here, or on our January Free Webinars page, where it is listed for 5pm EDT yesterday, as we had to delay the webinar a day due to a conflict.

Tuesday, 12 January 2021

A Strong Start to 2021

 My daughter went back to university on Saturday and that was the end of the holidays for me. They were the most relaxing for me in years which was nice, but all good things come to an end.

The UK is back on full lockdown until at least March due to the new COVID variant and that may last into the middle of the year. This new variant is much more transmissible it seems and many UK hospitals are close to being closed to new admissions, so the impact on health infrastructure is considerably greater than it was in the first wave of infections. This is the second wave. There are some cases of this new variant in the US but hopefully it won't become widespread.

There were three waves in the 1918 pandemic, but with luck the new vaccines will allow us to skip wave three. It will of course take several months to a year to vaccinate everyone who wants a vaccination though. On to the markets.

On the SPX monthly chart there is now a clear monthly upper band ride and the monthly upper band is now rising strongly. The SPX monthly upper band is now at 3781 and could reach 3800 by the end of the month if SPX keeps rising.

SPX monthly chart:

On the daily chart the RSI 5 sell signal hasn't quite failed, but at this stage I'd like to see a secondary divergence set up. That would require a retest of last Friday's high which seems likely, as the current short term setup on SPX looks like a bull flag forming.

SPX daily chart:

No current negative divergence on the SPX hourly chart and the high last week was a sufficiently large overthrow of the rising wedge resistance from the March low that I am weighing the possibility of a break up as significant, but still unlikely. The rising wedge on Dow from the March low looks similar.

I've been doing some work looking at possible targets if SPX does break up and we see a spike comparable to the highs in June and early November and I'll be looking at that in my next post. In the meantime though I'd note that in that event, the likely target area would be 4000-4100.

SPX 60min chart:

NDX led the move up into the June high, but has lagged since. I don't have an overall pattern from the March low, but I have a high quality rising wedge from the November low that has overthrown slightly.

NDX 60min chart:

In the short term on SPX the high on Friday made the second high on a decent double top. That double top broke down at the lows today so we have the usual inflection point where price can either head down towards the double top target in the 3740-3 area, or reject back up into Friday's high. I'm leaning towards the rejection back into the all time high retest option and, if seen, will be looking for weakness there.

SPX 5min chart:

We are running our next Trader Boot Camp at theartofchart.net starting 18th January and this is extremely competitively priced and covers a lot of territory. If you're interested you can read more about that here.

Stan and I did two public webinars at the end of December looking at prospects across a wide range of markets and you can see both of those posted on our December Free Webinars page. We also did our free monthly Chart Chart on Sunday and if you would like to see that, it is posted on our January Free Webinars page.

Planning to do my next post tomorrow or Thursday and in that post I'll be looking at extreme upside targets on SPX if price breaks up from what remains the obvious topping area here. Until then :-)