A big gap down this morning from Friday’s close at 2343.98, not quite filled at the time of writing with the high so far today at 2343.79. Unless SPX fails hard here this is a strong candidate low for at least a few days, and the resistance levels I’m watching are the gap fill, then declining resistance in the 2348 area, then the last rally high at 2358.92. On a break over that I’d expect a test of falling megaphone resistance currently in the 2382 area, and on a break over that the obvious target would be a retest of the all time high at 2400.98, very possibly to make the second high of a double top. SPX 60min chart:
I’ve been suffering with a bad back all week, and this has been disrupting my sleep so I’m hoping to catch up on sleep at the weekend, which I’m very glad is starting in a few hours. In the meantime ES is just chopping around waiting for nuggets of news about the progress of the Healthcare bill, which at the time of writing seems unlikely to pass today.
Yesterday’s high has held so far on SPX and yesterday’s high was of course a very obvious level for the rally to fail, so that may well continue to hold. If so SPX should at minimum retest Wednesday’s low and I’ll be watching possible trendline support now in the 2330 area. On a break over yesterday’s high there are multiple resistance levels in the 2365-70 zone. SPX 60min chart:
The rally that the bulls failed to manage yesterday has been delivered today, with SPX sustaining some trade above the daily lower band, though albeit not by a lot. So far the rally has retraced 50% of Tuesday’s decline while forming a very nice rising channel. So far this is a classic bear flag setup that on a break of channel support should at minimum deliver a retest of yesterday’s low. SPX 5min chart:
That was a very powerful break down yesterday, ending what I understand was the longest period on SPX ever without a 1% daily decline. The rising wedge from November 2016 has broken down. The minimum target retracement should be the 38.2% fib retracement target in the 2280 area, and the next trendline support is rising wedge support from the February 2016 low, currently in the 2220 area and rising of course.
In the short term the open sell signals on the daily and hourly charts have made target, and I am looking for a topping pattern. I am also watching for the potential lower band ride that may be starting here, and in the case of a strong lower band ride we may see the daily lower band, currently at 2347, act as resistance, and the 3sd lower band, currently at 2335, act as support. If bulls can convert the lower band at 2347 to support then they have a shot at a strong rally here that could potentially retest the ATH to make a likely second high of a double top. SPX daily chart:
The SPX rising wedge broke down slightly yesterday and then followed through hard this morning. I have a minimum target at the 38.2% fib retracement in the 2280 area. However I would normally expect to see a topping pattern at a high like this and while there is some potential for an H&S to form, I’d note that about 70% of SPX significant highs are made with double tops, so we may well still see an ATH retest before the main decline begins. If we are to just see a move to 2280, and that is going to be set up with a double top, then the obvious place to see the rally to the second high start would be in the 2340-50 area, and I have drawn in a couple of possible bull flag support trendline options for that. The first one has been tested at the current low today. The hourly RSI 14 sell signal has made target but no positive divergence yet. SPX 60min chart:
Everyone knows the story of the story of the race between the tortoise and the hare, but what if the race had been between the tortoise and another tortoise? Which tortoise would have won the race? The answer is that no-one would know, as no-one would have remained awake until the end of the race. Moving sideways into quantum mechanics for a moment, one could then argue that in the absence of an observer, with the arguable exception of the tortoises, that neither tortoise won the race, if indeed there had been a race at all.
Where am I going with this? I’m just observing that the market tape has been impressively dull lately, and that it will be nice when things speed up a bit, at the end of this seemingly endless topping process. In that regard though, things are at least moving along a little.
Remarkably SPX/ES is still in the same inflection point it was yesterday afternoon. I had expected to see some resolution either up or down on ES overnight but no, so both targets are still in play at either the strong support zone at 2368-72 SPX with rising wedge support, the ES weekly pivot, the 50 hour MA and the daily middle band, or a retest of the rally high at 2390. I’m expecting to see one of those targets hit today and and am leaning bearish, though without any great conviction. SPX 60min chart: