A week ago I commented on my SPX hourly chart that the obvious target for this move was falling channel resistance and SPX finally hit that at the high yesterday. After the confused mess of the last five days of trading that at last gives a clear setup here.
This falling channel is a likely bull flag which on a break up would have a minimum target at a retest of the all time high. The rising wedge from the March low has already retraced over 38.2% of the wedge so SPX could break up now into that retest. The open 60min buy signal likes that option and arguably so does the falling megaphone that has formed on the RSI 14 over the last few days. On the other hand a reversal here could well still reach the ideal 50% retracement target at 2405 that I gave at the end of July. Channel support is now in the 2395 area and a little low for that but there are a couple of alternate falling wedge support trendline options that could deliver a low close to that number. (more…)
After Tuesday’s trend up day the obvious target for a retracement on ES was a backtest of the weekly pivot and we have been seeing that tested over the last two days, repeatedly. So far bears haven’t managed to convert that to resistance, but they haven’t stopped trying, and they may still succeed. ES Sep 60min chart:
One of my favorite Thomas Jefferson quotes is that ‘the tree of liberty must be refreshed from time to time with the blood of patriots and tyrants’. Among other things that’s a reminder that all the powers of the state, however benign or harmless they may seem, are ultimately based on force and the threat of force, and every so often the use of violent means is inevitable either to maintain, alter or curtail that power.
What’s my point? Well markets are similar in the sense that any trend needs to be refreshed from time to time with the extraction of red ink either from those who challenge it, or those who defend it, sometimes both. In a downtrend that often involves a backtest of the daily middle band and it looks like we have another of those coming up shortly. (more…)
The daily middle band is a, and perhaps the, classic place for a bear move rally to fail, and after three days of failing to break above the SPX daily middle band this rally failed there into today’s solid trend down day.
Since I capped the SPX chart below SPX has delivered a new retracement low. I’d like to see a move down to the 2405 area next to follow the path that I sketched in on the SPX chart at the end of July. Ideally SPX would then backtest 2450, possibly hitting the daily lower band at a lower level there, and then decline to the 2320 area, very possibly making the main retracement low there and setting up a solid dip buy opportunity into the end of the year. SPX daily chart:
The decline into last week’s low was slightly over 2%, so the break back over the 5dma, now at 2457/8, has put SPX back on the Three Day Rule. In the event of a daily close more than two handles below the 5dma today or tomorrow, then historically there would be a retest in the near future of last week’s low at 2437. This is the highest probability historical stat that I watch. SPX daily 5dma chart:
Yesterday’s trend down day was a refreshing change of pace, and may well be the start of a decent decline, but the key is that a firm lid is kept on today’s rally, and that there is follow through to the downside early next week.
A move like the move yesterday that breaks and closes well below the daily standard (two standard deviation) lower band often starts the strongest kind of daily lower band ride that trades between the 2sd and 3sd lower bands. To make that a likelihood here the 2sd lower band needed to be resistance today, and it has been so far. SPX daily chart:
From what I’ve been hearing on the news I’m assuming that this week is International Overblown Hyperbole Week so I have given a nod to that in the title today.
Back here on earth the trend down day today has cleared out some support levels and SPX may well be starting a daily lower band ride, though obviously that will need some follow through tomorrow.
I’ll skip the futures charts today and expand on the index charts as it now seems likely that this much delayed pullback is at last getting started. If you would like to see the futures charts that I was looking at this morning they are on the my premarket video for Daily Video Service subscribers at theartofchart.net. I posted that on my twitter before the open and if you missed that then you can see it here. Other instruments covered in the video as well as ES, NQ & TF (covered at the start of the video) are CL, NG, GC, HG, DX, ZB, KC, SB, ZW, CC, EURUSD, GBPUSD, USDJPY, USDCAD, AUDUSD & NZDUSD. (more…)