This Time For Real?

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That was a very nasty bull trap last night. As the markets closed yesterday the IHS that I was looking at on ES yesterday morning had completed and broken up and SPX closed back above the 50 hour MA. I did note on the ES chart below that I did for theartofchart.net chart service subscribers last night that the breaks needed to survive the night, and they didn’t do that, with ES invalidating the IHS and making a new retracement low in globex.

So what now? Well that was a failure at resistance and next up is to see whether SPX and ES can break support. The globex low was at a test of the daily middle band on ES and I’m expecting to see a test of the daily middle band on SPX in trading hours today. Support on SPX is very clear, with a possible sloping H&S neckline in the 2078 area, the current retracement low at 2077, and the daily middle band at 2075. If SPX can sustain a break below these then the H&S target is in the 2040 area, the daily lower band is in the 2035 area, and I have possible larger H&S necklines in the 2030 and 2020 areas that I’d be watching for possible support. SPX daily chart:

160428 SPX Daily Support Levels

That was a nasty bull trap last night but I’ve written here many times before that when an an H&S or double top/bottom pattern fails, that tends to be just after they break up or down through the neckline/support. This was a classic example of that happening. ES Jun 60min chart:

160427C ES Jun 60min

On NQ there are a couple of H&S options here with a target range in the 4160-4260 area depending on which option seems more likely from what happens now. NQ Jun 60min chart:

160427C NQ Jun 60min

On TF I was looking at the impressive trendline resistance that TF was testing when I did this chart last night and noting that it looked impressively solid. It held. TF Jun 60min chart:

160427C TF Jun 60min

Bears have a chance to move this topping process along to the next stage today. Support is clear and all they have to do is break it if they can. I like their chances here as long as yesterday’s high at 2099.89 isn’t broken. I say the next stage because after the first topping pattern plays out in a process like this then then a larger topping pattern will generally form. As I said, I’ll be watching the possible H&S necklines in the 2030 and 2020 areas for possible support.

Today is a cycle trend day and so there are 70% odds that either buyers or sellers will dominate the day, though this does not require a full trend day. On this setup the bears are starting with a clear edge, though predicting direction on cycle trend days is very tricky, so that doesn’t necessarily mean much.