I posted the chart below on twitter last night showing the falling wedge that has formed on SPX from the current swing high, and commenting that this setup will usually be a bull flag that would resolve up into at least a retest of that previous high. I considered the various aspects of this setup and gave 80% odds in favor of a retest of the current 2011 swing high.
However I did note that when a setup like this does break down then that would often take the form of a breakaway gap down through support that was not filled. SPX has gapped down through daily middle band support at the open today, and that gap has not yet been filled. If this is a serious support break then that gap most likely won’t fill. If it does fill and we see a daily close today at or over the daily middle band (currently at 2075/6), then support will have held and that would strongly favor a retest of 2111 next week. SPX 60min chart:
That was a very nasty bull trap last night. As the markets closed yesterday the IHS that I was looking at on ES yesterday morning had completed and broken up and SPX closed back above the 50 hour MA. I did note on the ES chart below that I did for theartofchart.net chart service subscribers last night that the breaks needed to survive the night, and they didn’t do that, with ES invalidating the IHS and making a new retracement low in globex.
So what now? Well that was a failure at resistance and next up is to see whether SPX and ES can break support. The globex low was at a test of the daily middle band on ES and I’m expecting to see a test of the daily middle band on SPX in trading hours today. Support on SPX is very clear, with a possible sloping H&S neckline in the 2078 area, the current retracement low at 2077, and the daily middle band at 2075. If SPX can sustain a break below these then the H&S target is in the 2040 area, the daily lower band is in the 2035 area, and I have possible larger H&S necklines in the 2030 and 2020 areas that I’d be watching for possible support. SPX daily chart: (more…)
NDX is in a sloppy looking pattern, is dropping into a support zone and needs to hold the moving averages to avoid going from sloppy to bearish. Captains like Alphabet, Facebook and Apple are shaky to bearish and obviously valuations are starting to matter. NDX is down another 1+% in pre-market.
While the entire U.S. population slumbers under the suffocating gas of Central Bank Printing the cracks from totally stealing an entire populations disposable income is coming home to roost on the the beautiful people’s companies. The FANG’s, plus the Noveau rich’s favorite food emporium is starting to collapse. It is these companies collapsing that will bring the visibility and fear required to shake the market, and free the bears. Why?
This is this generation’s Nifty Fifty, in the sense that it totally dominates the young people’s waking life (I know, I have a 15 year old), the California chattering and Chardonnay class, and the Investment Bankers seeing their Unicorns racing back to Atlantis, and with it billions in fees and investor’s fortunes.
Apologies for the late post today. A very busy morning.
The FOMC news today is likely to be that there is no news, that interest rates won’t be rising this month, and there’s no press conference after 2pm to add spin to the announcement. Nonetheless markets will likely move on this absence of news, and I’ve been considering which way that might go. The bad news though is that there are decent setups in both directions here.
I’m pressed for time this morning so this is a good day to post the bonus charts that I did for theartofchart.net subscribers this morning. This gives you guys a now rare look at the non-equity index work that I do there nowadays, and if anyone would like to see these every morning, then all you need to do is sign up for the daily video service and you can do that here. If you’re thinking of doing that then I’d suggest doing that soon, as a week or two after our website upgrade our plan is to increase the price for new subscribers. The current plan is to do that website upgrade is this coming weekend. No price rises will ever be applied to an existing subscriber as long as their subscription is continuous.
On SPX yesterday the low was 2077, slightly above my target in the 2074 area but maybe close enough. The key levels today are the ES weekly pivot at 2083.2 (approx 2087/8 SPX), and the SPX 50 hour MA at 2091 (approx 2086/7 ES). Under these levels this current pullback can go lower, above then the lean would be higher. Over 2092 ES (approx 2096/7 SPX) I’d be looking for a retest of the current high high at 2111 and likely marginally higher.
ES Jun 60min chart:
Let’s take a step back at look at the Dow Jones Composite and the various phases it has gone through:
GREEN was what I called the “Ichthus” pattern, which was remarkably well-formed and accurately predicted the drop that was to transpire. It had a clean series of lower lows, as well. (more…)