Here’s a novel way to look at it:
The significant retracement that I was looking for yesterday never happened, as a triangle formed and then broke up, annoyingly after SPX and RUT both first broke rising channel support. The channel support that held was on NDX, and there is now a perfect rally channel there that I’m going to be using as my marker to show as and when this rally ends.
You probably won’t see a triangle on the charts easily but that’s because it was just an EW triangle. These often look like classical triangles but equally often don’t. This one below on NDX looks like a classical rectangle, but if you look at the RSI 14 then you see the underlying triangle there, which is generally the case. NDX has started a thrust out of the triangle and if sustained then the thrust should form a pattern, and then break down into a full retracement of the thrust. All of the sell signals from yesterday morning are still in place so as and when this thrust fails it will most likely fail hard. NDX 15min chart:
October continues to utterly stink for me because of the one-two punch of (a) strong equities and (b) strong commodities. I’m far from giving up hope, however, because the individual equity charts look as good as they ever did, and as prices have ascended, the quantity of sensible opportunities has expanded, since the risk/reward ratio is becoming more appealing across the board.
The “easy” part of the bull run is just about done, I think, as most indexes approach the huge overhang of supply. A couple of weeks ago, stocks were so battered that adding to shorts didn’t make sense. At present price levels, I think we’re getting a second bite at the apple. The Dow Industrials has a huge top between 17,100 and 18,400, and the 1700 point rise in the Dow (!!!) since the August crash puts us just beneath that big top.
The big delivery days for subscriber charts at theartofchart.net are Sunday and Wednesday, and on Wednesdays particularly I have been working very late producing them all. As I’m therefore somewhat sleep deprived on Thursday, I suspect that my Thursday morning posts are regularly going to be using a couple of charts drawn from the three or four dozen annotated charts that I produce on Wednesdays.
Yesterday looked superficially good for bulls. but under the surface things were going less well, with 60min RSI 14 sell signals fixing on both SPX and NDX. With SPX and RUT both in fragile looking rising channels that would break down on any weakness this morning, the odds of seeing some technical damage early in the session today look good
Well that certainly wasn’t a rejection candle yesterday, with the daily candle closing some 30 handles above the close on Friday, and with the close clearly above now broken falling channel resistance. However there is increasing negative divergence and I’m expecting some retracement soon. The first obvious target would be a retest of the daily middle band, now at 1948. SPX daily chart: