SPX just kicked around without any definite direction yesterday and so far today the same again, though we may now be starting to resolve down. This sideways action is neither bullish nor bearish, and is a decent fit with both the H&S and larger IHS scenario marked on the 60min chart below.
What is potentially interesting here is key support on the 50 hour MA, with that currently at 1909 and SPX at 1890 at the time of writing. If bears can convert that into resistance, having been support all yesterday, then we may resolve in the obvious direction, which is down. SPX 60min chart:
Early today, I saw a prominent article declaring that the low for 2016 was in, because there have been a couple of recent years in which early February marked the bottom for the year as well. Ummm, OK. This, to me, is about as meaningful as getting excited every October, simply because huge market crashes seem to take place during that month (like in 1929, 1987, 1990, and 2008, just to name a few). It’s dumb.
Indeed, if there’s anything I’ve noticed about recent market action, it’s that intermediate highs take place at the very start of each month. It’s actually kind of freaky, and this didn’t dawn on me until I began writing this post. I’ve circled about the 1st of November, December, January, and February below. I’ve also tinted the brief drop which, according to some, is the entirety of the 2016 Bear Market, and it’s all blue skies ahead from here on.
My speculation yesterday morning that SPX might well retest the ES weekly pivot at 1909 from the ES low for the day at 1865 proved to be right, and the possible H&S that I was speculating about in the morning has now made an ideal right shoulder high. You can see the setup on the 15min chart below. If this pattern completes and breaks down, then we should see the retest of the 1812 low in the next couple of weeks. SPX 15min chart:
Some days things happen so fast after the open that by the time I get my post up much of the post is already out of date. This is one of those days. On the charts below I outlined a possible bull scenario and assigned it a possibly overgenerous 25% probability weighting. That is a lot lower now as the overnight rally failed hard at the ES weekly pivot at 1909, which was the key support level I gave on ES yesterday morning.
On the plus side I shorted the obvious resistance at 1909 ES and my runner from that trade is currently +33 or so, so I’ll keep my grumbling to a minimum.
On the bear scenario the rising wedge rally from the 1812 low broke down yesterday after an ideal 50% fib retracement of the falling megaphone from 2081, and as that rising wedge was a bear flag on the bigger picture. the alternate targets for the bear flag are either a retest of the 1812 January low, or the full flag target in the 1690 area. The high this morning was a perfect retest and hard fail at broken rising wedge / flag support. SPX 60min chart:
I confess that I was worried this morning. I had 120 short positions, 0 longs, and the intraday ES looked absolutely bullish. I’ve tinted the pattern below, and it looked like a very painful day ahead. However, as you certainly know by now, the rally-that-was-to-be fell to pieces immediately, and my profits are again soaring.
Given the torture I endured for years with these bullish turds, the amount of sympathy I have for such disappointments is simply too low to be measured, even with the most modern scientific instruments. As far as I’m concerned, the stock indexes should be permitted to do precisely what interest rates are doing these days: go into negative territory.
The bulls? Screw ’em all.
SPX had a strong day yesterday but has given it all up overnight. 15min RSI 14 and 60min RSI 5 sell signals are brewing and may well fix this morning. This is a possible rally high, especially as SPX tested the 50% fib retrace target at the high yesterday.
The important support levels on SPX this morning are rising support in the 1910 area and the 50 hour MA in the 1905 area. If SPX breaks below those levels then the rally bear flag has broken and the first big target is a retest of the January low at 1812. While those levels hold SPX still has a shot at reaching the 61.8% fib retrace target at 1978. SPX 60min chart:
The Junk Bond Market topped in 2011, Commodities, as well, the Real Estate Market Topped in 2014, the Stock Market topped in 2015, and now we are seeing gold, U.S. bonds, and the dollar starting to positively correlate.
It is time to revisit with Mr. Exeter. He created a risk pyramid, that shows how investors cascade down from high risk to no risk assets as aversion and default gains steam.