SPX broke strong resistance levels at the 50 DMA and the 1976-8 level yesterday to close at a very impressive 1985. That break up over the 50 DMA opens up the daily upper band as a target and that closed yesterday at 2003. With FOMC today it seems unlikely that Yellen can say a great deal to cheer the markets, QE3 has ended and is unlikely to be even temporarily revived, and the Fed has made so many soothing noises about future interest rate rises already that it’s hard to see what they could add to that. Nonetheless some more soothing noises today might just get SPX to that target at the upper band. SPX daily chart:
I was talking yesterday about the 1976 SPX target and the trendline resistance that may well be there. SPX is likely to gap up today and we will see whether that target is hit today and if so, whether the trendline holds. SPX daily chart:
At the point where SPX broke hard through the 50% fib retrace the overall trend shifted from bear to unknown in my mind, and it’s still in unknown territory now. I’m not assuming that this will resolve in either direction until I see some stronger evidence, but I’ll be calling the shorter term likely moves, which at the moment look a decent fit with either bull or bear overall trend.
Looking at the pattern setup at the close yesterday, and the recovery overnight, I have a new educated guess for the direction on SPX over the next few days. I’ll lay that down here and we’ll see how that goes. (more…)
Yesterday bounced hard, then retraced all of that bounce to make a marginal new low, and closed slightly up. The bounce has established the 200 DMA as resistance and was the fifth day out of the last six that SPX has closed well under the daily lower band. The lower band closed at 1883 yesterday and could close as low as 1965-70 today. SPX daily chart:
I was asked yesterday morning why the tone of yesterday’s post was so bearish, and the reason was of course that I thought the odds favored a significant move down. We saw that move and both the SPX 200 DMA and main double top support broke down with a lot of conviction. The double-top target is the 1789 area and I’m expecting SPX should hit that target within a few days. The trend on the market has changed for the moment and while we will get some rallies, I won’t start looking seriously for a low here until we reach that 1789 target area. I’m not expecting to be waiting long for that.
I’ve been looking at my RSI 5 / NYMO daily buy signal that triggered at the 1970 high with some concern here, as it might have delivered a stronger rally than I’m expecting, but it failed at the close yesterday, so it is no longer a concern. That was the first outright fail from the signal trigger since the start of 2007, but there’s a first time for everything. It’s not unprecedented. Looking back further I found another fail in a strong downtrend in 2002. The timing of this signal was particularly annoying, but hey, that’s the market we trade in. SPX daily chart: (more…)
The 10-Year Weekly chart below of the USD/CAD Forex pair shows a bearish “hanging man” formation on this week’s candle…signalling a potential weakening of the U.S. dollar against the Canadian dollar. Price hit the confluence of a major triple-top resistance level, 50% Fibonacci retracement level, upper Bollinger Band, and upper Channel last week.
The very strong decline yesterday caught me by surprise, as we had a very nice setup to retest the highs and a strong daily buy signal to back that up. I was expecting SPX to hold the 1940-50 area in line with fib retracement targets and that didn’t happen. So where does that leave us this morning?
Well in terms of the buy signal these are most immediately bullish in the context of a supportive pattern setup. We had one yesterday morning and we don’t have it now. The very nice double bottom setup is badly, and most likely fatally, damaged. I’m not a big believer in triple bottoms, which are rare, and tend to be raised as a possibility mainly when a possible double bottom is in the process of coming apart. The falling megaphone target back at the highs was only really interesting in the context of that double bottom. My megaphone targets as counter-trend patterns are the standard range of fibonacci retracements, and this one has already retraced slightly over 50% of the megaphone move. (more…)