Stan and I are doing the first of two ‘Trading Toolbox’ free educational webinars an hour after the close today at theartofchart.net, and this one will be looking at the use of bollinger bands in day and swing trading. If you would like to attend then you can register for that on our September Free Webinars page.
After an interesting start this morning ES settled down into the comatose tape that has been characteristic of afternoons recently. The morning was definitely interesting though, with the ES rising wedge support that was tested perfectly at the low yesterday breaking this morning. That hasn’t followed through yet, but may follow through soon, ideally after just one more all time high retest. ES Dec 60min chart:
If you don’t immediately recognise the title for today’s post then I must first warn you that your knowledge of Lewis Carroll’s literary works is dangerously deficient.
So why am I thinking of Alice in Wonderland today? Well it is Fed day, and for me the Fed always bring Wonderland to mind. I was talking to my older son a few weeks ago explaining that in the same way that lawyers trained for years to achieve a state where they could swallow (figurative) camels and yet still strain at gnats, economists went through a process where after years of patient study that seemed to require at least a PhD, they achieved a state where measures that looked reckless or even suicidal to the less trained eye were revealed as both sensible and necessary.
He asked whether the Fed’s track record at steering the economy in the past was impressive, and I told him that it had delivered a succession of ever greater disasters over recent decades. He then asked why people still nonetheless trusted the Fed to deliver policy, and I replied that people had to believe that the Fed knew what they are doing, as the alternative was just too terrifying. I added that the Fed never admitted to making a mistake, which reassured many, and that Ben Bernanke had an impressively bushy beard that had inspired confidence, though Yellen had needed to manage without one so far for technical reasons. (more…)
After a memorably boring four day range consolidation Tuesday through Friday last week, SPX finally broke up and tagged 2500 at the close on Friday. This should follow through to the upside, short term at least, and I have some targets to watch, and a warning that this move over 2500 may well not last the week.
On SPX the obvious trendline target is rising wedge resistance, currently in the 2514 area, and a strong match with rising wedge resistance on the ES chart. On the daily chart (not shown below), there is a possible RSI 5 / NYMO sell signal brewing, but the negative divergence is slight and might well be lost on a green close today or tomorrow. SPX 60min chart:
It’s been a generally dull week, and since the bull flag on SPX made target with a new all time high there hasn’t been much movement in either direction. We are still ideally looking for another leg up into the 2509 area but the setup for that last leg up is starting to sour slightly, with hourly sell signals already fixed on ES and the SPX RSI 5. The move should really be in the next couple of days if we are going to see it without a significant retracement first. SPX 60min chart:
Last week was an in-between week but the key support levels all held, and after the strong open this week SPX is now close to the bull flag target at the retest of the all time high. I show below that another bull flag channel has now also broken up on NQ, and I’m expecting an all time high retest there as well. SPX 60min chart:
A couple of years ago a long-term reader described me as an ‘if, then’ analyst, and that was a decent description. The short term setup here is very much an ‘if, then’ setup. If short term support holds, then the rally should resume into the flag target at the retest of the all time high.
So where is that support? On the hourly chart that is at the 50 hour MA, currently at 2461 and with the 200 hour MA just below. That’s been tested in the last day or so with more enthusiasm than I would prefer, but that’s holding so far. SPX 60min chart:
Yesterday morning’s bear flags broke down harder than expected and on SPX the move delivered a hard test of the daily middle band. That’s not inherently bearish as long as that holds as support and it did. Unless that changes the obvious target remains a full retest of the all time high. SPX daily chart: