I’ve blocked my latest twitter troll, though apart from the one with very poor english a few weeks ago, I strongly suspect that I’ve had the same troll on twitter and my blog for a few months now. If I’m right then he has a London IP address and seems to have a lot of time on his hands. Some of you may have been wondering about the posted trade I mentioned to him, as it’s rare for me to post these, but I was a bit irritated at the 2015 high with being called a permabear for calling a high there, and with clueless pundits telling me that big retracements wouldn’t be allowed by the Fed, so on Tuesday 26th May 2015
I wrote a post helpfully entitled ‘On The Road to 1820‘, with SPX at 2126 at the time, and mentioned that I was short from 2132 ES and was planning to hold it for a 300 handle decline. I cashed that short at 1812 on the morning of Wednesday 20th January 2016 and reviewed it at the end of my post that day called ‘The Trend Is Strong In This One‘. It was a sweet trade (and call of course) and I considered that my point had been made. Needless to say my troll wasn’t impressed, but then it’s not possible to impress a troll. On to the markets.
The short term rising wedge on SPX either overthrew yesterday or widened into a small rising channel, but the big news on the hourly chart was that the high established a perfect overall rising channel for this move from early December. The AM high today was a slight break below short term rising channel support and on a conviction break below the next obvious target would be larger rising channel support, currently in the 2285 area. I do like a retest and marginal new high from here, that would set up possible 60min sell signals and get SPX a little closer to my 100% fib extension target at 2356/7. It would also give AMZN and TSLA a chance to do the ATH retests that may be required for a swing high here on NDX/NQ. SPX 60min chart:
Another new all time high this morning and SPX is still on a daily upper band ride. That could end at any time but we’re going to need to see some evidence before having any confidence in a turn here. This move up from the last low is in a decent little rising wedge and obviously that rising wedge support needs to break, but the key level that needs to break is yesterday’s low at 2322.17. A break below would be a significant sign of weakness and the short term high (at least) would likely then be in. There is a lot of negative divergence on the hourly chart and the rising wedge on price and rising channel on the RSI 14 are firmly leaning bearish. SPX 60min chart:
Before I get into the Trade Idea, I’m going to review the context of the S&P500 from a structural standpoint and a typical deviation standpoint. First of all, structurally, the Weekly and Daily charts show higher highs and higher lows, the very definition of an uptrend. In November of 2016, the SPY completed a $20 wide trading channel of which currently price is a stone’s throw from its high resistance. The channel would suggest that buying potential is limited.
Now, anyone who hangs around the comments has seen that I use 5% simple moving average envelopes around a 100MA as a measure of movement potential (oversold, neutral, overbought). Where are we now? Yep, hit it on Friday. Again. (Click on any chart to see a larger version).
SPX retested the high and has made a new all time high with enough confidence that I am looking seriously at the next trendline target in the 2318 area. This is the resistance trendline on the rising wedge from the start of January. SPX 60min chart: