- 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
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Tuesday, 21 March 2023

Testing The Water

I was writing on Friday about the nice looking rally setup on SPX and NDX particularly but obviously SPX was close to first resistance at the daily middle band and I was doubtful about that being broken on Friday, and it wasn't broken then, or indeed yesterday.

This morning though, SPX has gapped over the daily middle band, currently at 3059, and the next targets to the upside have opened up, though this rally may reached a sudden end tomorrow at FOMC when, in all probability, the Fed will fail to announce that interest rate policy will be softened over the rest of the year.

SPX daily BBs chart:

Resistance at and just above the daily middle band is on the weekly chart, and can't of course really be broken until the close on Friday. The 50 week MA is now at 3966 and the weekly middle band is now at 3977.

SPX weekly chart:

I'm watching three main US equity index charts on this rally and the first is SPX, where SPX is close to a test of declining resistance from the Feb highs, now in the 4009 area. On a break above there are open alternate double bottom targets in the 4030 and 4040 areas.

SPX 15min chart:

On NDX a high quality bull flag setup has broken up with a target at a retest of the February high at 12881. Not much currently to suggest that target won't be made, though I do have some negative divergence on the hourly RSI 14.

NDX 15min chart:

The third pattern is a high quality IHS on Dow which has broken up with a target in the 33150 area. Typically this would either head to the target, or fail back into the IHS low at 31.7k.

INDU 15min chart:

For the obvious reasons I'm skeptical about this rally surviving FOMC tomorrow and Thursday, but in the short term I'd expect to see at least some more upside.

An hour after the close on Thursday we are doing our monthly free public webinar at theartofchart.net looking at FAANG stocks and Key Sectors. If you'd like to see that you can register for that here, or on our March Free Webinars page.

If you are enjoying my analysis and would like to see it every day at theartofchart.net, which I co-founded in 2015, you can register for a 30 day free trial here. It is included in the Daily Video Service, which in turn is included in the Triple Play Service.

ChatGPT Apocalypse Postponed

ORIGINALLY POSTED AT THEARTOFCHART.NET ON FRIDAY 17th MARCH

I had been reading on and off for a month or so that ChatGPT had been forecasting a market crash on the Ides of March this year, and so was watching that with very mild interest yesterday to see whether this latest claimant to the Nostradamus throne might have any luck, but the day passed without a crash as expected. Predicting apocalypse is a famously tricky endeavour. Better luck next time I guess.

I was remarking though in my premarket video yesterday at theartofchart.net that for a day where everyone seemed to be leaning bearish, there were some surprisingly nice looking bullish reversal setups. One of those was the possible double bottom on SPX, which has now broken up with a target in the 4025-4040 range and backtested broken double bottom resistance this morning.

SPX 15min chart:

There was also a possible hourly RSI 14 buy signal brewing on the SPX chart that fixed yesterday and has not yet reached target. These generally reached target and that favors at least some more upside here.

SPX 60min chart:

I posted a very decent looking bull flag channel/wedge on NDX on Wednesday last week, and as NDX has been relatively strong in this latest decline, that had not broken down, and then also broke up yesterday. This is a high quality flag with three touches on both support and resistance, and has broken up with a clear target at a retest of the February high at 12881. I'm not seeing anything currently to suggest that won't make target.

NDX 15min chart:

There is however some very significant resistance on the way to these upside targets on SPX, particularly today as today is the last day of the week. The first of those is the daily middle band, currently in the 3968 area and effectively tested at the highs yesterday and so far today.

SPX daily BBs chart:

The SPX weekly middle band is in the same area, currently at 3967, so this is a strong double resistance level. That is also backed up by the 50 week MA, currently at 3975, and both of these levels are important on the weekly close basis today, though a break back above both today could of course be rejected next week.

SPX weekly chart:

I've been watching the bank troubles this week with some interest. One thing that has really changed over the last couple of decades is that bank runs can happen a lot faster now that money is now generally transferred electronically. There aren't the queues that used to be the marker of a bank run.

Another thing is something I wrote about as a risk a decade or so I think, and that is that stuffing banks full of long term bonds with very low coupons as their capital base would likely end badly when interest rates normalised as they would then be sitting on huge capital losses that would become a big problem if they were forced to liquidate those assets (in a bank run for instance) rather than hold them to maturity.

The solution seems simple though. As long as the Fed is prepared to stand behind the banks and provide liquidity this problem, mainly created I would note by the Fed, shouldn't be an issue. This is an issue however in a situation where a bank becomes insolvent for other reasons but it is a fix that can be applied without lowering interest rates (inflationary), large bailouts (inflationary) or printing money (inflationary). At the moment therefore this currently minor bank panic doesn't look that serious to me, though I could be mistaken.

SPX is testing some serious resistance here and it may be that if that resistance is going to be broken, then that won't happen until Monday. This is a nice bullish setup to go at least a bit higher in the short term though and it may well play out. We'll see.

On Sunday last week we did our monthly free public Chart Chat at theartofchart.net, and if you missed that you can see that here, or on our March Free Webinars Page.

Everyone have a great weekend :-)

If you are enjoying my analysis and would like to see it every day at theartofchart.net, which I co-founded in 2015, you can register for a 30 day free trial here. It is included in the Daily Video Service, which in turn is included in the Triple Play Service.

Friday, 10 March 2023

No Improbability Drive

I was saying on Wednesday that the decent looking bullish setup was still there, but in the light of the Fed Chairman's candid comments about future policy over the last few days a significant drive higher was looking improbable. I was looking for a test of weekly pivot at 4007 and then a fail there if we were going to see the bull scenario fail. SPX made it back to 4017 and failed hard, so the bull scenario, while not quite entirely dead, is now looking increasingly unlikely.

On the weekly chart, the bear scenario looks for a break back below the 50 week MA at 3990 and the weekly middle band at 3969. A rally today is likely, but for a clear move onto the bear scenario here I'd like to see a weekly close today below the weekly middle band at 3969, and lower lows next week. If we see that then the obvious target would be the 200 week MA, currently at 3726, and the key support level for SPX. A break and conversion of that level would open potentially much lower targets.

SPX weekly chart:

On the daily chart the RSI 5 buy signal reached the possible near miss target so I'm now disregarding that.

SPX daily chart:

So where is the short term support that is keeping the bull scenario breathing for the moment?

Well the first level is the broken declining resistance that has already been backtested as support, and that was being tested again at the low yesterday. A sustained break below 3900 should eliminate that as a support level.

SPX 60min chart:

The other level I was watching before the RTH open today was the bull flag channel support on SPX, but that has now broken, which leaves the bullish pattern scenario from Monday now hanging by a very thin thread. If this flag has in fact broken down, then the pattern target for that break is in the 3600 area.

SPX 15min chart:

The other bull flag that has broken down is on IWM, which broke yesterday. That just leaves the flag setup on NDX with support currently at 11700, though with the SPX and IWM flags already broken I'm already almost entirely disregarding that.

IWM 15min chart:

In practical terms the bullish pattern setup has already failed and the downside scenario is now the likely one with a target at the 200 week MA in at 3726 and possible support there. A break and conversion of that level opens up further downside targets.

In the short term I'm thinking we might see a retracement to backtest the weekly middle band at 3969 on SPX to see whether it holds as resistance. If SPX closes below that today then that further strengthens the bear scenario here.

On Sunday this week we are doing our monthly free public Chart Chat at theartofchart.net, and if you'd like to see that you can register for that here, or on our March Free Webinars Page.

If you are enjoying my analysis and would like to see it every day at theartofchart.net, which I co-founded in 2015, you can register for a 30 day free trial here. It is included in the Daily Video Service, which in turn is included in the Triple Play Service.

Wednesday, 8 March 2023

The Dove That Didn't Coo

I was writing about the very attractive looking bull flag setups on SPX, NDX and IWM that are setting up possible tests of the February highs. We saw the retracement that I was expecting then but SPX has broken back below the weekly pivot at 4007 on the press conference yesterday by the Fed Chairman.

The markets are very used to doveish noises being made by the Fed, but these are not normal times, and the Fed has been stepping up to their duties to fight inflation with real enthusiasm. Powell has been trying to get this point across and in his press conference yesterday restated his view that interest rates would be unlikely to top out at under 6%, that the stronger than expected economic data recently was only hardening the Fed's hawkishness on interest rates, and added that unemployment might need to be two million higher to deliver the slowdown necessary to deliver lower inflation.

Looking at bonds this morning I'm still not sure that the markets believe that the Fed is serious about this, but I believe Powell. Unless he steps up to the plate on inflation here he risks becoming a cautionary example for the next generation of economists and central bankers, and he doesn't want to risk that.

To open the downside however there are a couple of key levels that need to be converted to resistance. The daily middle band now at 4049 is holding as resistance already, but SPX also needs to break and convert the 50 week MA now at 3992, and the weekly middle band, now at 3972. These are being tested now and that break and conversion opens the downside.

SPX weekly chart:

The daily middle band was tested as resistance at the highs this week and held. If we are to see a break up, then that needs to be broken and converted to support.

SPX daily BBs chart:

How much further upside should we see? Well the flags I posted on Monday are all still in play and on the SPX 15min chart there is a possible bull flag channel from the 4195 high, and the obvious next target within that flag would be channel resistance, currently in the 4090 area. A decent quality double bottom broke up on Friday with a target in that area and is still valid.

SPX 15min chart:

On NDX there is another decent looking bull flag channel, and again there was a decent quality double bottom that broke up on Friday with a target in that area and made target. The resistance trendline broke slightly and if we see that break again that will look significantly bullish into a retest of the February high.

NDX 15min chart:

There is a third bull flag setup on IWM, not a channel and this one has already broken up, with a possible target back at a retest of the Feb high at 199.26, and an IHS target that broke up on Friday in the 194.7 area. That IHS target is close to failing though, and a move below the right shoulder low at 186.12 would look for a full retracement back to 185.78.

IWM 15min chart:

We may be about to see this bullish leaning setup fail this week, with the uncertain outlook for the economy, more interest rate rises coming, and the Fed being unusually honest about their bearish leaning plans for interest rates. About 30% of bull flags break down of course, and I see that happen regularly. We shall see.

In the short term I'm hoping to see a retracement to backtest the weekly pivot on SPX at 4007.25, to see whether it holds as resistance. If SPX breaks back up through it with confidence then the bullish scenario back into the February highs retests is still on the table. I'd enjoy trading that but under the circumstances I'm doubtful.

On Sunday this week we are doing our monthly free public Chart Chat at theartofchart.net, and if you'd like to see that you can register for that here, or on our March Free Webinars Page.

If you are enjoying my analysis and would like to see it every day at theartofchart.net, which I co-founded in 2015, you can register for a 30 day free trial here. It is included in the Daily Video Service, which in turn is included in the Triple Play Service.

Monday, 6 March 2023

A Cluster Of Flags

Support has been tested hard over the last couple of weeks on SPX, and the week before last there was a potentially interesting break below the 50 week moving average, currently at 4002, and then a test of the weekly middle band, now at 3960. Had SPX managed to close last week again below the 50 week MA, that would have been an important technical break down, and any subsequent break below the weekly middle band might have opened a serious break to the downside.

However SPX rallied on Friday to close well above the 50 week MA, so the break lower was rejected, and support at the weekly middle band has held the last two weeks. So where does that leave SPX?

SPX weekly chart:

At the low last week there was clear positive divergence on the daily RSI 5 on both SPX and NDX. That fixed on the late week rally into two daily RSI 5 buy signals, neither of which has reached target yet, so I'm expecting to see at least some more upside on both.

SPX daily chart:

How much further upside should we see? Well I was updating my charts at the weekend and, while I'm thinking we might see some retracement in the next day or two, there is a decent looking bull flag channel formed on the SPX 15min chart from the 4195 high, and the obvious next target within that flag would be channel resistance, currently in the 4098 area. A decent quality double bottom broke up on Friday with a target in that area.

SPX 15min chart:

On NDX there is another decent looking bull flag channel, and the next obvious target within the flag would be channel resistance, currently in the 12440 area. Again there is a decent quality double bottom that broke up on Friday with a target in that area.

NDX 15min chart:

There is a third bull flag setup on IWM, not a channel and this one has already broken up, with a possible target back at a retest of the Feb high at 199.26, and an IHS target that broke up on Friday in the 194.7 area.

IWM 15min chart:

We could see this bullish leaning setup fail this week, with the uncertain economy, more interest rate rises coming, and two Fed speakers this week, but this is very much a bullish leaning setup, leaning towards at least some more upside and very possibly setting up a retest of the February highs across the board on US indices, though that could just be establishing a series of bearish double tops of course.

In the short term I'm hoping to see a retracement to backtest the weekly pivot on SPX at 4007.25, that could set up a nice long for the rest of the week that could take SPX up a couple of hundred handles. I'd enjoy trading that so we will see.

On Sunday this week we are doing our monthly free public Chart Chat at theartofchart.net, and if you'd like to see that you can register for that here, or on our March Free Webinars Page.

If you are enjoying my analysis and would like to see it every day at theartofchart.net, which I co-founded in 2015, you can register for a 30 day free trial here. It is included in the Daily Video Service, which in turn is included in the Triple Play Service.

Wednesday, 22 February 2023

Rallying From Major Support

We saw the breakdown on SPX that I was warning about on my last post, and so far SPX is finding support in the 4000 area, which is the obvious support level as there is an intersection of decent support levels here. There are hourly buy signals fixed overnight on all of the six equity index futures I track on a daily basis and, subject to FOMC today, the pressure to deliver a rally today is strong.

The only support level not yet quite tested is rising wedge support from the 2022 low, and I'm wondering whether that, currently in the 3965 area, might need a test before the rally that we should see here. If we do see a test of that trendline and it holds, then that will open wedge resistance, currently in the 4240 area, as a possible target.

SPX 60min chart:

I was talking a lot last year about the 50 week MA, currently in the 4011 area, as key resistance on SPX before it was broken in January. The biggest support level I have been watching on this move down has been that backtest, which is holding well so far. On my bull scenario SPX could start another leg up from this test.

SPX weekly chart:

On the daily chart the daily middle band, now in the 4091 area, was broken on Monday and SPX made it to the daily lower band yesterday. This also makes this an obvious area to rally.

SPX daily BBs chart:

So what is happening here on the bigger picture? Well I'm thinking that decision gets made after this rally, ideally in the SPX 4070-4100 area. This may be an H&S forming on SPX that on a rally to that area, and on a subsequent conviction break below 4000, the target would be in the 3800 area.

However there is a decent case that what we have been watching from the early February highs are a series of bull flags forming  on the equity indices. That case was strengthened yesterday when IWM hit a trendline I drew in a few days ago as the ideal theoretical bull flag wedge support trendline.

IWM 15min chart:

The low on NDX yesterday was equally impressive, establishing a perfect bull flag channel from the 2023 highs.

This morning though that channel broke, leaving me with only one perfect bull flag setup on IWM, though all of the moves on the US equity indices from the 2023 highs have a flaggy look to them in the way they have formed. We will see.

NDX 15min chart:

Subject to FOMC today I am looking for a rally back into the 4070-4100 area on SPX next and then an inflection point where SPX could either break down hard towards the 3800 area, or break up into a retest of the early Feb highs which might then be a double top setting up a retracement back to the same 3800 area.

On the pattern setup this morning I'm thinking that could easily go either way at 4100, so we'll see what, if anything, the Fed might say this week to move the market either way.

If you are enjoying my analysis and would like to see it every day at theartofchart.net, which I co-founded in 2015, you can register for a 30 day free trial here. It is included in the Daily Video Service, which in turn is included in the Triple Play Service.

Monday, 13 February 2023

Possible Break Down Starting

I was hoping that SPX would go higher and test a possible resistance trendline in the 4300 area and that is still possible, but reviewing the charts over the weekend there is a strong possibility that SPX is about to break down.

So far the high is a near perfect backtest of the monthly middle band, which is not the most obvious resistance level, but is a very significant one nonetheless, as it is regularly tested fairly exactly as support in uptrends.

SPX monthly chart:

On the weekly chart the previous main resistance at the 50 week MA, now at 4021, has been broken and the break above confirmed. That is now an important support level and if we are going to see a hard break down that will need to be re-broken and converted to resistance.

SPX weekly chart:

The first serious support however is at the daily middle band, currently at 4053/4. That held on Friday and at the last test in January. The first sign of a serious break down would be a confirmed break below that.

SPX daily BBs chart:

The daily middle band is supported by the rising support trendline from the December lows, currently in the 4047/8 area. A break of both would look distinctly bearish.

SPX 15min chart:

Looking at the short term on ES the overnight high was just below the new weekly pivot at 4116.25, and the patter from the low on Friday morning looks like a rising wedge that may be a bear flag. A sustained break over weekly pivot would make this look a lot more bullish.

Adding a note just after the RTH open, ES has just perfectly tested resistance on this rising wedge, confirming the resistance trendline with a third touch. This wedge could still break up, but 70% of the time these break down of course.

ES Mar 15min chart:

There are some international numbers being reported today that should shed more light on global inflation levels. My suspicion looking at a lot of charts over the weekend is that either those will disappoint, or that the markets will respond negatively to them not disappointing.

We held our monthly free chart chat webinar yesterday at at theartofchart.net. If you'd like to see that you can see it here or on our February Free Webinars page.

If you are enjoying my analysis and would like to see it every day at theartofchart.net, which I co-founded in 2015, you can register for a 30 day free trial here. It is included in the Daily Video Service, which in turn is included in the Triple Play Service.

Tuesday, 24 January 2023

Very Important Resistance Area Here

The possible H&S I was looking at on Friday morning didn't form and the move to retest the prior high has done some interesting technical damage to the bear case, so I wanted to have a look at that this morning.

The SPX hourly chart below shows the break over declining resistance from the all time high, which held perfectly at the December highs and established a high quality three touch resistance trendline.

On the bigger picture there is also a decent case that a falling wedge has formed from the all time high on SPX that could be a bull flag. That flag wedge would have underthrown bullishly at the October low and this might therefore be the start of a break up towards a possible retest of the all time high.

For a variety of reasons I am skeptical about that happening here but this is nonetheless certainly an interesting development and I'll be watching carefully to see whether this can follow through to the upside and convert the main downtrend resistance, which is of course the 50 week moving average.

SPX 60min chart:

The possible bull flag on NDX is nowhere near as convincing, but there was also a break over declining resistance from the all time high on NDX yesterday.

NDX 60min chart:

Main resistance for the current downtrend of course is at the 50 week MA, and there were close touches of this at the August and December rally highs. That is now at 4030.04 so the high yesterday was another close touch. If bulls can break and convert this to support then the possibility of a retest of the all time high will become an option on the table.

SPX weekly chart:

In the short term SPX is retesting the daily upper band so there is some resistance here. No current negative divergence on the hourly chart but that could be easily fixed with a retest and fail at yesterday's high.

SPX daily BBs chart:

On the 15min chart the obvious pattern from the December low is a rising megaphone and, if so, the obvious resistance trendline would be in the 4080-5 area at the moment. Obvious SPX could be on the way to a retest of the December high and, if so, that is another potential point of failure, setting up a possible double top to retest the October low. We'll see.

SPX 15min chart:

How significant is this resistance break? Well even if the 50 week MA breaks and converts to support, a retest of the all time high is not the only option. SPX might just be establishing a new rally resistance trendline and, if seen, I have a possible channel resistance trendline not far above the December high that I'd be keeping an eye on.

We are are holding our monthly free big five and key sectors webinar an hour after the RTH close at 5pm EST on Thursday 26th January. If you'd like to attend you can register for that here or on our January Free Webinars page.

My next post should be on Thursday or Friday before the open.

If you are enjoying my analysis and would like to see it every day at theartofchart.net, which I co-founded in 2015, you can register for a 30 day free trial here. It is included in the Daily Video Service, which in turn is included in the Triple Play Service.

Friday, 20 January 2023

Turning As Expected So Far

I'm finding it difficult to get back into doing more than one post a week. I shall try hard to get two out next week.

On SPX a week ago I was looking for a reversal under declining resistance from the all time high, and ideally a decline and high retest to set up a possible daily RSI 5 sell signal. I got the first of those but not the second.

The decline from the high was too large to set up the RSI 5 sell signal and as time goes by, unless we are going to see a break of declining resistance from the all time high, a high retest is looking less likely as soon it might need to break that resistance to retest the current high.

Unless we are going to see that break then the short term high is likely made, and I'm watching a possible H&S pattern that may well be forming here with a target that would take SPX back to the last short term low at 3764.99.

SPX daily chart:

On the weekly chart main resistance at the 50 week MA held again, currently at 4036.42, and if the short term high is made then then next obvious target is another test of main support at the 200 week moving average, currently at 3568.75. If bears can manage to break and convert this to resistance then this would open potentially much lower targets.

SPX weekly chart:

In the short term SPX is rallying at the daily middle band, now at 3881.54, which is the obvious level to see a rally. If the short term high is in, this will then need to be broken and converted to resistance to open up lower targets.

SPX daily BBs chart:

The hourly RSI 14 sell signal that was brewing last week fixed and made target. No buy signal at the low larger than the weak RSI 14 buy signal that has fixed on the 15min chart.

You can see that declining resistance from the all time high is now in the 4025 area, just a few handles above the January high so far at 4015.39.

SPX 60min chart:

What I think may well be happening here is that this rally is establishing a right shoulder on a possible H&S that if it forms and makes target would look for a retest of the December low at 3764.49. Ideally the right shoulder high would be in the 3950 area and I will be looking for a possible high there.

SPX 15min chart:

We are are holding our monthly free big five and key sectors webinar an hour after the RTH close at 5pm EST next Thursday 26th January. If you'd like to attend you can register for that here or on our January Free Webinars page.

I will endeavour to ensure that my next post is on Tuesday or Wednesday before the open. Everyone have a great weekend. :-)

If you are enjoying my analysis and would like to see it every day at theartofchart.net, which I co-founded in 2015, you can register for a 30 day free trial here. It is included in the Daily Video Service, which in turn is included in the Triple Play Service.

Friday, 13 January 2023

Friday The Thirteenth

I mentioned in my post a week ago that on a break back over the daily middle band there were fixed buy signals on the daily and hourly charts that might carry SPX significantly higher and so it was, with SPX hitting 3997 at the high yesterday, and those buy signals have now all made target. I'm looking for signs of a high forming, and there are some signs here.

There is no negative divergence on the daily chart here yet, so I'm thinking we might see a sharp retracement here back into the daily middle band, currently at 3868, then retest the high to set up a possible double top.

SPX daily chart:

On the 15min chart there was a sloppy IHS that broke up with a target in the 3400 area, and the high yesterday was close enough that I'm treating that target as reached.

SPX 15min chart:

On the hourly chart both RSI 14 and RSI 5 sell signals may be brewing here, and looking at the overnight action both of those may fix at the open. There is a possibility of course that the high for this move was made yesterday. If so I'll be watching the possible H&S necklines in the 3940 and 3880 areas.

You can see that declining resistance from the high is now in the 4035 area. I would be surprised to see that broken after the perfect hold at the rally high in December. If that is going to hold as resistance on this move then this short term high is close or already made.

SPX 60min chart:

On the weekly chart main resistance for this downtrend is at the 50 MA, and that is now in the 4047 area, just above declining resistance. Unlike declining resistance from the all time high, that would be more complex to break, needing a break and conversion to support, but both major rallies last year failed there almost exactly.

SPX weekly chart:

If we have already seen the high on the short term move, the clear signal that it was finished would be a break and conversion of the daily middle band, now at 3868. If this retracement gets that far then I'll be watching that carefully.

SPX daily BBs chart:

We held our free monthly public Chart Chat at theartofchart.net last Sunday and we included our forecasts for 2023 on a wide number of indices and sectors, as well as our top picks for the year. If you'd like to see that you can see it here, or on our January Free Webinars page.

Today is one of the rare trading days to fall on Friday the Thirteenth. Is that significant? I've been watching these for quite a while and, as they seem to trade much like any other Friday in the main, not particularly.

My next post should be on Monday or Tuesday before the open. Everyone have a great weekend. :-)