Yesterday went almost entirely according to plan. All the short term buy signals that fixed on Friday afternoon made target, and SPX tested the broken H&S neckline and the 50 hour MA at the high. Where SPX went off script was the close slightly above the daily middle band, which caused some technical damage that needs to be repaired by a decent close back below the middle band today. At the time of writing that looks likely. SPX 60min chart:
Here’s your swing-trading watch-list:
Short AES Corp (AES)
Well here we are. The rising wedges from the February low on SPX, RUT and NDX have all broken down now, and today is the first trading day of the most historically bearish part of the year running through to the end of October. Most of this week leans bearish historically as well, apart from today, with Dow up 13 of the last 18. With Friday closing on multiple short term buy signals I’m looking for rally today and maybe tomorrow, and for the downtrend to resume after that. Tuesday and Wednesday are the cycle trend days this week and at least one of those should be a trend down.
I posted the chart below on twitter last night showing the falling wedge that has formed on SPX from the current swing high, and commenting that this setup will usually be a bull flag that would resolve up into at least a retest of that previous high. I considered the various aspects of this setup and gave 80% odds in favor of a retest of the current 2011 swing high.
However I did note that when a setup like this does break down then that would often take the form of a breakaway gap down through support that was not filled. SPX has gapped down through daily middle band support at the open today, and that gap has not yet been filled. If this is a serious support break then that gap most likely won’t fill. If it does fill and we see a daily close today at or over the daily middle band (currently at 2075/6), then support will have held and that would strongly favor a retest of 2111 next week. SPX 60min chart:
Here are my 3 Swing Trade Ideas for Thu, Apr 27, 2016: Apollo Global Management, LLC (APO), Cincinnati Financial Corp. (CINF) and Cheniere Energy, Inc. (LNG).
That was a very nasty bull trap last night. As the markets closed yesterday the IHS that I was looking at on ES yesterday morning had completed and broken up and SPX closed back above the 50 hour MA. I did note on the ES chart below that I did for theartofchart.net chart service subscribers last night that the breaks needed to survive the night, and they didn’t do that, with ES invalidating the IHS and making a new retracement low in globex.
So what now? Well that was a failure at resistance and next up is to see whether SPX and ES can break support. The globex low was at a test of the daily middle band on ES and I’m expecting to see a test of the daily middle band on SPX in trading hours today. Support on SPX is very clear, with a possible sloping H&S neckline in the 2078 area, the current retracement low at 2077, and the daily middle band at 2075. If SPX can sustain a break below these then the H&S target is in the 2040 area, the daily lower band is in the 2035 area, and I have possible larger H&S necklines in the 2030 and 2020 areas that I’d be watching for possible support. SPX daily chart: (more…)