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Sunday, 12 December 2021

Choices Choices

 SPX did the lower low I was expecting in my last post and found support at the rising support trendline from the March 2020 low, as I had suggested it might.

The strong rally since then is now within striking distance of a retest of the all time high, and if seen, the normal range for the next high of 3% to 4.5% above the 45dma, now at 4598, would now be in the 4736 to 4805 range. That is particularly interesting as that range includes the retest of the all time high at the lower end and I have the main resistance trendline on SPX at the upper end in the 4800 area.

SPX daily vs 45dma chart:

On the SPX weekly chart the retracement low was also a backtest of the weekly middle band, now at , always a key support level and one which will need to be broken and converted to resistance in order to enable any more substantial pullback to take place.

SPX weekly chart:

On the daily chart SPX has broken back over the daily middle band and converted that to support and until that changes that is key short term support, now at 4652.

SPX daily chart:

The SPX 60min chart is the most interesting here though. In terms of support the retracement low was a slight break of the rising support trendline from the March 2020 low, leaving a possibility in the mix that a topping pattern is forming here to follow through on that slight break.

On the resistance side I redrew the SPX resistance trendline to include the last high, and that trendline is a very strong four touch resistance trendline. That is wedge resistance, and if we see SPX continue higher after a retest of the all time high then it is there that I would be expecting strong resistance. As I mentioned higher, the upper end of the normal topping range against the 45dma is currently in the 4804 area, and that resistance trendline is now in the 4800 area. If we see a test of that trendline then that will reconfirm that the wedge is still forming, and we should see a high form there to take SPX back towards that rising wedge support, currently in the 4500 area.

SPX 60min chart:

NDX is also looking interesting here, mainly because the H&S that broke down there never made the target in the 15,200 area, and that target is therefore still open unless and until the H&S fails, which would be on a break back up over the right shoulder high at 16,454.60. If we see that break, then the target from that break would be a retest of the all time high on NDX, so I'm watching that with particular interest.

NDX 60min chart:

In the short term there are three main options on SPX here, and decent arguments for all of them, though for obvious trading reasons I would prefer to see the test of the main SPX resistance trendline in the 4800 area.

The first option is that SPX has been doing wave B of an ABC bull flag sequence and is about to start a C wave down to a lower retracement low, before a likely all time high retest after that. If SPX is going with this option I would expect the B wave high very shortly.

The second option is that SPX is going to retest the all time high, and that is the second high of a double top that on a sustained break below 4495 would look for a target in the 4250 area. If SPX takes this option I'd be looking for a likely high before Xmas.

The third option is that SPX heads for that resistance trendline currently in the 4800 area, but rising of course. That would be the best fit with seasonality here and, if seen, I'd be looking for the sharp retracement in early January that is seen two or three times in most decades. This would be my preferred option as it would likely be the easiest and most profitable to trade.

A larger high may be forming here, and I'd refer back again to the backtest scenario that I was looking at in my post on Friday 6th August. This could be setting up for that backtest here and I'm watching for a possible larger topping pattern to form that could deliver that target.

We are doing a free public webinar at theartofchart.net  an hour after the RTH close on Thursday on the Big Five and Key Sectors and if you'd like to attend you can register for that here, or on our December Free Webinars Page.

The Daily Lower Band Ride


The mean reversion move that I was looking for in my posts over the last two weeks has now completed, with SPX breaking below the 45dma, now at 4562. That is the main target for the move hit, though that doesn't mean that the low is necessarily in, or close. There are some signs that a low may be forming here, but as yet not enough  of those to suggest that this retracement is likely to be in yet.

SPX daily vs 45dma chart:

On the SPX daily chart the decline is a daily lower band ride and main resistance is the daily middle band, now in the 4660 area. Important short term support is at the 3sd lower band, now in the 4469 area with closes close to the 3sd lower band on both Tuesday and Wednesday. If hit, a close much below it would be rare, so any hit is likely a decent short term long opportunity.

How long can a daily band ride last? Well these can last a while actually, so I'm going to review the important levels and targets below.

SPX daily chart:

SPX made both the alternate double top targets I gave at 4540 and 4515, so the next and very important support level is rising support from the March 2020 low. On my daily charts it looks as though that has been hit but on the hourly chart below you can see that isn't yet the case, and I have that in the 4480-5 area. There is now a strong chance that will be tested.

If that support is broken, then there are no further targets below, but there is a possible H&S neckline and established support level at the October low at 4278 that might then be a possible target, particularly as Nasdaq has stopped trailing on the way down and has now been the weakest of the main US indices since the lows yesterday morning.

The daily RSI 14 sell signal has not yet made target but I would note the possible RSI 5 buy signal that is now brewing, which is one indicator suggesting that a retracement low on SPX may be close.

SPX 60min chart:

On NDX the daily RSI 14 sell signal is also not close to target yet, and the rising support trendline from the March 2020 low is now in the 15200 area. That is also of course the target on the H&S that I've been looking at on NDX since last week and which broke down early this week. With NDX now fully on board with this retracement that target is now looking more likely to be hit.

This is the H&S on NDX shown on the 15min chart. That has now made it more than halfway to the target at today's low, and the high quality support trendline shown on this chart that I was thinking might hold broke on the decline this morning. The corresponding high quality support trendline on NQ also broke, so that has cleared the main obstacle that might have prevented this target on NDX being hit. I would put the odds of hitting it now at over 50%. We'll see.

NDX 15min chart:

Could a larger high be forming here? Yes, and I'd refer back again to the backtest scenario that I was looking at in my post on Friday 6th August. This could be setting up for that backtest here and I'm watching for a possible larger topping pattern to form that could deliver that target.

We our running our monthly public Chart Chat at theartofchart.net at 4pm EST on Sunday and obviously that's likely to be pretty interesting this month. If you'd like to attend you can register for that here. or on our December Free Webinars page. We look at the setup on equity indices there as well as the usual very wide range of other instruments. Particularly interesting looking setups on bonds, USD and silver if you are taking a look.

I've mentioned before that I'm developing a new daytrading room with my long term daytrading collaborator Paul Buckles. That's in late beta at the moment and I'm looking for a few more of my longer term readers who daytrade to come and join us while we are making this ready for market. Obviously there would be no charge and we will be explaining our methods, which are mainly mathematical, as we do this. For any who then want to join when we launch the room there will be a reward in the form of a special discount for them. If you're interested email me on springheeljack666 at gmail dot com.