Apologies for the intermittent updates over the last couple of weeks. It’s been very busy and I’m hoping to get back to posting every day again next week.
So another round of new highs and I read that the Vix has fallen to a 24 year low this week. There is an emerging consensus that equity indices will never drop meaningfully again and SPX and NDX are getting close to some big round numbers in the 6000 and 2500 areas respectively that are likely to develop a magnetic pull the closer SPX and NDX get to testing them.
So is it time to write off the bears altogether? Well we’ll still likely see at least retracements when the setups are right for them and as it happens the retracement setups are looking pretty good right here, though to develop negative divergence on the daily charts we would likely see retracements and then marginal new all time highs on both before any larger move. Those marginal new all time highs, at this point, could test those big numbers at 2500 and 6000.
NDX has made it over halfway from the break of the flag to the retest of the all time high, and I am treating that retest as the 70% likelihood option here. On the way though there is a lot of short term negative divergence that will likely deliver a retracement, maybe today but otherwise tomorrow. On NDX that may well require a retest of the short term high first. NDX 60min chart:
SPX and NDX both delivered breakaway gaps up on Wednesday that were not filled. Both of the possible bull flags that I was looking at on SPX/ES and NDX/NQ as the lower probability alternate on Wednesday morning broke up, and SPX and ES have made the minimum bull flag targets at the full retests of their all time highs this morning. So what now?
This is a smaller but still significant inflection point here at the marginal new all time high on SPX/ES. The possible SPX daily RSI 5 buy signal that I was looking at on Wednesday morning fixed and has made target, and it’s possible that SPX / ES will make marginal new highs here in the second highs of double tops. If so, ideally, there would be a pullback in this area and then marginal higher highs to set up a daily RSI 5 sell signal on SPX.
Another week, another inflection point on indices, and after eleven days of compression we are likely to see a resolution up or down today and whichever way this resolves is likely to deliver a daily upper or lower band ride in the direction of the break. Today is a cycle trend day and the odds of seeing a full trend day in either direction are unusually high. We’ll see how that goes. The setup favors downside resolution, but the day is starting with a spirited attempt at a break up. We’ll see whether that lasts.
I’ll start with NDX here as Nasdaq is still driving the equities bus, and on NDX there is a possible H&S right shoulder forming here that is currently overshooting the ideal right shoulder high, but not to an extent that weakens the setup. There is an alternate read that a bull flag forming wedge is forming here, and if that wedge resistance currently in the 5800 area is tested from here then that option becomes a lot more likely. If that bull flag wedge was then to break up the minimum target would be an all time high retest on NDX. NDX 60min chart: (more…)
SPX rejected from the backtest of the daily middle band yesterday and came close to a retest of last week’s low at the intraday low today. There is a compelling case for seeing that full retest tomorrow as well as a retracement low retest on NQ and that the next important inflection point is there. I’ll be looking at why that is below. SPX daily chart:
I posted my premarket video on my twitter before the open today and if you missed that then you can see that here. I included charts on XLE and XLF today.
On SPX the daily middle band was backtested today and was respected. As long as that remains the case on a daily close basis then last week’s low at 2405.70 should at minimum be retested soon. SPX daily chart:
I posted my premarket video on my twitter before the open today as I was going out and wasn’t certain I’d be back before the close and if you missed that you can see that here. What I was talking about on ES here was a high quality falling megaphone that had formed on ES on which pattern resistance had been tested twice overnight. If that continued to hold then the likely retracement targets were either a 50% retracement back to the 2430 area or a move back to megaphone support, hit at lunchtime today at 2408.5 and very possibly bullishly underthrown at the current intraday low at 2402.25. This brings us to another important inflection point.