SPX made a marginal lower low yesterday as expected and then rallied back into main resistance at the daily middle band, which closed yesterday at 2158/9, with the 5dma and 50 hour MA slightly above in the 2161/2 area. SPX closed a handle above the middle band but in practical terms I count a close less than two handles away from the band as a close on it.
One thing you often see in this kind of situation is a kind of symmetry where unusual setups can repeat several times in a short period and we might have a situation like that here. The last two times that the middle band was tested SPX gapped through it and at the open today SPX has gapped through it again. Both of the last two gaps were breakaway gaps that did not fill that day or the day after. We may see that again today and, if so, that would be a strong start to the ATH retest that we are expecting. SPX daily chart:
All three indicators on this 5-Year Daily chart of the World Market Index are slightly above their respective zero levels, with price hovering above the 50 moving average. They’ll all need to hold at or above those levels, otherwise a sharp failure would likely spell big problems for U.S. equities.
That was a strong retracement yesterday and the H&S targets that I was talking about on ES and NQ yesterday morning slightly sceptically have been made. What happens today is very important as the scenario that Stan and I are running here is that ES has broken up from a triangle into last week’s high, and the sequence after this kind of triangle break is a backtest of the triangle, which is happening now, and then the main triangle thrust up begins. Ideally that means we see a low on ES this morning, very possibly reverse yesterday’s move entirely over the rest of the day, and then thrust up to a retest of the all time high over the rest of the week. After that triangle thrust ends we should see a full retracement back to the level of this morning’s low and then we’d expect that to be the start of the larger retracement down that I’ve been talking about.
SPX closed Friday at a decent looking support level but when I was looking at the SPX, RUT & NDX charts over the weekend it was pretty obvious that the bulls were going to have their work cut out for them today. Below are the SPX and RUT charts I posted for Trader Chart Service subscribers at theartofchart.net yesterday. I haven’t changed the text but price has been updated and I’ve removed the gap that was filled on SPX at the open this morning.
You can see that SPX has broken below the rising megaphone support that I was looking at as a target on Friday morning. SPX 15min chart:
The high window opens on SPX today and runs through to Monday 3rd October. During this period Stan and I are expecting to see a very significant high made that would then be followed by a decline that would be considerably larger than the modest retracement just completed. We are looking for a likely full retest of the all time high, with an eye on higher targets in the 2203, 2206/7 and 2210 areas.
On the daily chart SPX confirmed the break back over the daily middle band with another close above it yesterday. This opens a possible test of the daily upper band, currently at 2202. I’d generally expect to see a retest of the middle band from above today or Monday, and that is currently in the 2161 area. SPX daily chart:
We are well along in the precious metals correction and have downside targets for gold, silver and the miners. In order for that to be a ‘buy’, the sector and macro fundamentals will need to be in order. Some of those are represented by the gold ratio charts vs. various assets and markets. Below are two important ones.
Gold vs. Stock Markets has been correcting the big macro change to the upside since leading the entire global market relief phase (potentially out of the grips of global deflation) earlier in the year. A hold of these moving averages, generally speaking, keeps a key gold sector fundamental in play as the implication is that conventional casino patrons are choosing gold over their traditional go-to assets, stocks. A breakdown from the moving averages and it’s back to Pallookaville for the gold “community”.
All charts and video today done last night or this morning for subscribers at theartofchart.net.
SPX spent much of Friday under the 5dma, but rallied to close on it, so the three day rule was not triggered. Bears have a second and last chance today to close more than two handles below the 5dma, currently at 2138.10. If they can then the rule states that we see a retest of the current retracement low at 2119 and likely go lower. If they can’t then the retracement low may well already be in and SPX likely rallies into the high window that opens on Thursday 23rd September, ideally retesting the current all time high or going a bit higher into the 2210 target that Stan and I are looking at. SPX daily 5dma chart: