The daily middle band is a, and perhaps the, classic place for a bear move rally to fail, and after three days of failing to break above the SPX daily middle band this rally failed there into today’s solid trend down day.
Since I capped the SPX chart below SPX has delivered a new retracement low. I’d like to see a move down to the 2405 area next to follow the path that I sketched in on the SPX chart at the end of July. Ideally SPX would then backtest 2450, possibly hitting the daily lower band at a lower level there, and then decline to the 2320 area, very possibly making the main retracement low there and setting up a solid dip buy opportunity into the end of the year. SPX daily chart:
I have some things to do this afternoon (and I’ve filled every body cavity you’ve got with trading ideas already, so there’s that) – – thus I will leave you with this one chart of the IWM illustrating that, thank Jesus, we have broken this ascending channel.
I’ve shown this chart over, and over, and over again, but it demands repeating: Finish Line (FINL). I have rarely seen such a fantastic top. I’ve been short it a while, and I added more this morning. It’s a beauty, a honey, and furry little bunny.
The decline into last week’s low was slightly over 2%, so the break back over the 5dma, now at 2457/8, has put SPX back on the Three Day Rule. In the event of a daily close more than two handles below the 5dma today or tomorrow, then historically there would be a retest in the near future of last week’s low at 2437. This is the highest probability historical stat that I watch. SPX daily 5dma chart:
FirstEnergy Corp. (FE) established tight base over the last two weeks and break of resistance in the 32.4 area could trigger new up wave.
Yesterday’s trend down day was a refreshing change of pace, and may well be the start of a decent decline, but the key is that a firm lid is kept on today’s rally, and that there is follow through to the downside early next week.
A move like the move yesterday that breaks and closes well below the daily standard (two standard deviation) lower band often starts the strongest kind of daily lower band ride that trades between the 2sd and 3sd lower bands. To make that a likelihood here the 2sd lower band needed to be resistance today, and it has been so far. SPX daily chart:
As I woke up at 5:30 a.m. this morning, I’ve got to say I wasn’t at all surprised to see this on the ES: