Bears have dominated the day today, though that hasn’t actually delivered a lot of downside on SPX or NDX. We may see a late rally into the close. Bigger picture this is day five of the daily upper band ride and if we see a weak close today and that follows through on Monday that would open a possible test of the daily middle band, currently at 2360. SPX daily chart:
Yesterday opened and closed between the daily upper 2sd and 3sd upper bands, but that has changed today with the 2sd upper band established as resistance in the morning and afternoon. Today is day four of the daily upper band ride, which continues until a day when the daily 2sd upper band isn’t tested as resistance. SPX daily chart:
Yesterday was the third day of a daily upper band ride and was of a stronger type where the daily 2sd (two standard deviations away from the middle band) upper band acted as support and the daily 3sd upper band acted as resistance. The 2sd upper band is currently at 2388 and the 3sd upper band is in the 2404 area, so a retest of the ATH on SPX is under that resistance today. Today’s low was at 2388 and the high so far is at 2398. Unless we see a break back under 2388 with some confidence we may well see that ATH retest today. SPX daily chart:
I was saying yesterday morning that bulls wanted to hold 2368/9 on the backtest to go higher. The low of the day was 2369.19 and here we are. Short term though there is some formidable resistance at the daily 3sd (three standard deviations away from the middle band) upper band at 2394. Breaks over this level are rare, and an actual retest of the high will likely need to wait until tomorrow, when the 3sd upper band will be higher. SPX daily chart:
ES/SPX found support where expected on Friday and reversed back up towards triangle resistance as expected, and then gapped over that at the Sunday globex open and the SPX RTH open, which was not expected. The triangle may be breaking up with a target at the retest of the all time high, and the opening gap up from 2355.84 is a candidate breakaway gap into that retest. There is a possible high here, but bears need to break down hard and fill that breakaway gap, ideally today, at latest tomorrow. Otherwise SPX likely retests the all time high. The 5dma is currently at 2351 and is likely out of reach for a close below absent a serious news bomb today. SPX daily 5dma chart:
The decline from 2378.36 to 2328.95 wasn’t big, but it was over 2%, if only just at 2.08%. That means that with the daily close back over the 5dma yesterday SPX is back on the 5dma Three Day Rule, which states that on a daily close back (more than 2 handles) below the 5dma on either of the two trading days after the break back above, the last swing low below the 5dma (at 2328.95) should be retested before the last swing high above the 5dma (at 2378.95) is retested. This is a very strong statistic, though in this case the preceding move obviously wasn’t large. The 5dma is currently at 2347 and may close several handles away from that number depending on what happens before the close. SPX daily 5dma chart:
I had a very busy day yesterday and didn’t manage to get a post out. Hopefully some of you caught my premarket tweet which captured the day nicely:
So what about those lower lows, which we haven’t seen yet? We the pattern setup is clear enough, with a small rising wedge that formed from the 2328.95 low and has broken down with a minimum target at a retest of 2328.95. To get there however the possible triangle support would have to break, and that’s at 2331 and hasn’t broken yet. While that triangle support holds SPX may still be returning to triangle resistance, currently in the 2371-3 area. On a break below that triangle support the downside opens up, and SPX can go considerably lower.