First Spike Down

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When a high of whatever degree is being reached there is very often a first spike downwards that signals that the push is coming to an end. SPX (or whatever) often recovers back to make a new high, but the seed has been sown and a larger retracement arrives shortly thereafter. I think that’s what we saw yesterday in all likelihood.

What makes things a bit less comfortable now is that in May at the high then, I could state with real confidence that we were not looking at a possible bull market top because there was no negative divergence on the weekly RSI. Now that those highs have been tested, and until this bull market ends as and when, that will no longer be the case, and any interim top will need to be considered as a potential bull market top. I don’t think that bull market top is close, but that’s something to bear in mind. SPX weekly chart:

130717 SPX Weekly Trendlines BBs MAs

SPX closed 16 points under the daily upper bollinger band yesterday, so SPX is no longer riding the band upwards. For reasons I’ll explain below a deeper retracement starting very soon looks likely so the first support level and target is rising support from the June low in the 1660-5 area and if that is broken, then the next support levels and targets are the 50 DMA, currently in the 1635 area, and the daily middle bollinger band in the 1630 area. SPX daily chart:

130717 SPX Daily Trendlines BBs MAs

On the SPX 60min the rising wedge from 1604 broke down yesterday and after assessing the setups on my spread of 8 US equity indices I think it is clear that SPX is forming a rising wedge rather than the rising channel that had looked promising. Main rising wedge support is the next obvious target and that is in the 1660-5 area. SPX 60min chart:

130717 SPX 60min Rising Wedge

I’m running late today which is a shame because there was a very nice looking W bottom setup when I capped the ES chart with a target at 1679.75 and I was going to highlight this nice looking long setup. As it happens that that target has now almost been made while I was writing though on the plus side at least I got to play it for a very nice start to my morning. I am looking for a hit of that target on ES today and ideally a new high on SPX over the current 1687.18 high. That would be an attractive looking short entry if we get it. ES 60min chart:

130717 ES 60min Rising Wedge and Poss DT Forming

I posted the short term declining channel on 5th July with the comment that I wasn’t expecting it to break up yet as there was no clear bottoming pattern. The updated version below shows that bottoming pattern which is now part-formed , and the TLT declining channel is now breaking up. As I have been saying every day, this is a nice long setup within a larger nice long setup. The W bottom target is the 115.40 area on a clear break over 110.80. TLT 60min chart:

130717 TLT 60min Decl Channel and Poss W Bottom Forming

I’m out of time so I won’t post the GBPUSD chart today, though I’ll note that the rally there is extending as expected, and I’m watching for signs of reversal. I’ll close today with the CL chart, where I am looking for the second high of a double-top. Ideally that second top would be a marginal new high but we might not get that. CL 60min chart:

130717 CL 60min Poss Double Top Forming

I would like to see a new high on SPX today. If so then that would most likely be the second high of a short term double-top, and I would be seeing that as an opportunity to short into strength. I don’t think it is likely that this is a very significant high but we’ll get a better idea about that from the form of retracement.