The significant retracement that I was looking for yesterday never happened, as a triangle formed and then broke up, annoyingly after SPX and RUT both first broke rising channel support. The channel support that held was on NDX, and there is now a perfect rally channel there that I’m going to be using as my marker to show as and when this rally ends.
You probably won’t see a triangle on the charts easily but that’s because it was just an EW triangle. These often look like classical triangles but equally often don’t. This one below on NDX looks like a classical rectangle, but if you look at the RSI 14 then you see the underlying triangle there, which is generally the case. NDX has started a thrust out of the triangle and if sustained then the thrust should form a pattern, and then break down into a full retracement of the thrust. All of the sell signals from yesterday morning are still in place so as and when this thrust fails it will most likely fail hard. NDX 15min chart:
Notwithstanding the bearish moving average Death Cross that has now formed on the Japanese Nikkei Index, all three indicators are hinting of higher prices, as shown on the 5-year Daily chart below.
At the moment, major resistance sits at 19000, while minor support is at 17000, with major support at 16000. I’d watch the RSI, in particular, to see whether it can rise (and stay) above the 50.00 level. If so, we may see price spike to 19000 before consolidating — then, either, attempt to penetrate above (and reverse) the moving average cross-over and rally to, potentially, new highs, or drop to new lows around the 16000 level. Otherwise, a hold below 50.00 on the RSI may see price plunge as low as 16000 (or lower), first.
October continues to utterly stink for me because of the one-two punch of (a) strong equities and (b) strong commodities. I’m far from giving up hope, however, because the individual equity charts look as good as they ever did, and as prices have ascended, the quantity of sensible opportunities has expanded, since the risk/reward ratio is becoming more appealing across the board.
The “easy” part of the bull run is just about done, I think, as most indexes approach the huge overhang of supply. A couple of weeks ago, stocks were so battered that adding to shorts didn’t make sense. At present price levels, I think we’re getting a second bite at the apple. The Dow Industrials has a huge top between 17,100 and 18,400, and the 1700 point rise in the Dow (!!!) since the August crash puts us just beneath that big top.
The big delivery days for subscriber charts at theartofchart.net are Sunday and Wednesday, and on Wednesdays particularly I have been working very late producing them all. As I’m therefore somewhat sleep deprived on Thursday, I suspect that my Thursday morning posts are regularly going to be using a couple of charts drawn from the three or four dozen annotated charts that I produce on Wednesdays.
Yesterday looked superficially good for bulls. but under the surface things were going less well, with 60min RSI 14 sell signals fixing on both SPX and NDX. With SPX and RUT both in fragile looking rising channels that would break down on any weakness this morning, the odds of seeing some technical damage early in the session today look good
I was thinking of making this post a video, but I recognize that the problem with videos is that you actually have to watch the damned thing. Text and pictures are more accessible. So, here we are.
October has, in the five trading days we’ve experienced so far, been a big disappointment for me. I guess I should have assumed it would be, coming on the heels of a fantastic Q3 (both for my portfolio and for Slope in general). Everything goes in cycles. I’m just too much of a brat to be able to tolerate this kind of thing.
SPX retraced a bit yesterday, rather more so than the daily candle suggested, as the retrace of the channel from Friday’s low to yesterday’s high was close to the 23.6% minimum in a strong trend. I’m expecting more, but it may go the other way.
If we are going to see more retracement then I’m looking for a double top or H&S to form here to take SPX down towards the obvious targets at rising support from the 1871 low and a retest of the daily middle band, now at 1948. SPX 15min chart:
I’ll be the first to admit being disappointed that last night’s Bank of Japan “nothing done” announcement led to a lift in ES after being down oh-so-briefly. All the same, looking at the big picture, it seems to me the broad trend still favors patient bears. What would really help the cause would be for oil to start losing some of its gusto (and I’m really hoping Gartman’s mega-bullishness on commodities starts to work its magic soon):