Category Archives: Patterns

The Flagging Dow Industrials

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Only three charts today as I’ve had a lot on this morning.

One reason I do my optic run views on my seven main US equity indices is because while SPX is often the technical leader, by which I mean not that it moves fastest, but that it is delivering the cleanest trendlines/patterns and fibonacci retracements, that is not always the case. That leader at the moment is the Dow Industrials, and my first two charts will illustrate why that is.

The rising wedge on SPX that I tweeted on Tuesday night hit the very well defined wedge resistance (tweeted at the high yesterday) and then broke down on the frankly very predictable not really news that QE3 had ended in October as planned, and the usual assurances that the Fed would be fighting hard to keep interest rates near zero until the stars fall from the sky. Now those of you who have been looking at my work closely for a while might have wondered why I was giving strong weight to a pattern on SPX that was mediocre due to the poorly defined support trendline, and the answer to that question is of course that ………. SPX 15min chart: (more…)

USD Dollar and FOMC Today

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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:

141029 SPX Daily Trendlines BBs MAs

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Flags and Double Reversals

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SPX closed the week on the weekly middle band at 1964. This is a very significant resistance level and the key thing that bulls would like to do this week is to break back above it. Only the weekly close matters for this so we could see SPX trading above it intra-week without that being a bullish break. SPX weekly chart:

141027 SPX Weekly Rising Megaphone

I’ve been giving some thought to the circumstances in which we could see the IHS target in the 1976 area made this week, and it would be very close indeed to possible falling channel resistance from the high. On the bigger picture this would be a bull flag channel of course, SPX daily chart:

141027 SPX Daily Possible Bear Flag Channel

The pattern setup from the 1820 low continues to favor short term reversal here. There is strong support and an obvious target if that gets going in the 1926-31 area. SPX 15min chart:

141027 SPX 15min Rising Wedge Broken Down

Looking at intraday patterns I often remark that a double top after a strong trend that fails to break down is generally a bull flag, and that happens a lot. You see it on the larger timeframes too and there’s a very nice example on the AAPL daily chart where that bull flag broke up last week. When this happens there are two main options, the first being that the second high of a larger double top is being made. That’s probably the more likely option here given that AAPL is close to resistance on a larger and very nice looking rising megaphone. The second is that the flag is a mid-point consolidation in a larger move up. If the megaphone breaks up that would give a target in the 125 area. AAPL daily chart:

141027 AAPL Daily Rising Megaphone

I find that USO makes a reasonable oil proxy and the 60min chart here shows the trendline setup on oil here. There is very well defined and and strong declining resistance above, and at some point USO will rally to at least test that. I have cautiously drawn in a possible falling megaphone and if that’s right, USO may be basing for that rally now. For now however I am not confident in that lower trendline and the consolidation is looking rather like a bear pennant for continuation downwards. Oil is still a brave and possibly doomed long at this level. USO 60min chart:

141027 USO 60min Possible Falling Megaphone

I am expecting to see a strong retracement on SPX soon, and that should start this week. It may be that won’t start until after the Fed on Wednesday, but as I strongly suspect they won’t have much ‘good’ news to report in terms of QE, the Fed may well trigger that retracement. I am expecting SPX to close flat or negative this week overall.