Pennants and Flags (by Springheel Jack)

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SPX dropped a little yesterday, and that felt like the start of a retracement, but it didn't look much like it. On the SPX 15min chart it has formed a very nice bull pennant, though as both trendlines are declining it could be seen as a falling wedge indicating back to a test of the Monday high. Either way this looks short term bullish unless SPX can break below it, and indicates to at least a test of the highs if it breaks above:

If we do see a test of the highs it's worth noting that declining resistance from the April high is in the 1396 area:

On the SPX daily chart the upper bollinger band should also provide decent resistance in the 1392-8 area. Worth noting that the IHS from the June low has a target in the 1403-5 area:

On NQ the setup looks more like a flag. On a break over the high and very strong resistance in the 2670 area we could see a quick run into the 2700 area. The resistance break would definitely look significant:

I've been considering some of my longer term bear pattern charts this morning to consider how much further SPX might rise without these charts turning bullish. Looking at the MSWorld chart there's still some room, and extrapolated onto SPX we could see a move to test the 2012 highs or even the 1440 area pivot. That would set up the potential double-top on SPX that I've been mentioning every so often over the last few weeks with a target at a test of the October lows. Something to bear in mind if we get a wave of euphoria based on (most likely) groundless expectation that the ECB will start running the printing presses in earnest:

I'll be watching that pennant on the SPX 15min chart carefully this morning. If it breaks up I'll be expecting a test of the Monday high, and if it breaks down then big support on SPX is still in the 1360 area. Bernanke is at Jackson Hole this afternoon which could be a big market mover, and it's worth noting that of the first trading days of the month this year, only the first trading day in June has closed down on SPX.