Instead of a retracement yesterday there was another face-ripper trend day that blew through all of the resistance levels I was looking at yesterday morning on SPX. I looked again at what I wrote on my weekend post about the very bullish history of the weekly candle we saw last week:
Of the seven previous examples of these white or black positive close candles (since 1974) all seven returned directly to the weekly upper bollinger band, and further of those seven only one retested the middle band in the following week
What we are seeing this week is entirely consistent with that and given where we are now I am doubtful about seeing a retracement from this area that could even retest the weekly middle band, now at 1789. SPX weekly chart:
On the daily chart yesterday SPX took out with some confidence the daily middle band (1802 area), the 61.8% fib retracement (1807 area), and the 50 DMA (1809 area). The SPX RSI 5 has now hit 70 so that positive divergence buy signal has played out. Looking at my main-index daily chart NDX is the strongest, almost at new highs and SPX is the next strongest. Dow, TRAN, RUT and BKX are all still short of or testing the daily middle band. We could still see bullish IHS patterns form on RUT, TRAN or BKX, but I’m inclined to rule these out now on NDX, SPX and Dow. Main-Index Daily chart:
There is no negative divergence on the SPX 60min chart, though it now very overbought. Such negative divergence would require a higher high than yesterday’s, though we would not always see such divergence before a retracement. There is negative divergence on the 15min RSI, which is less reliable, but I will show the SPX 15min chart today because of the decent looking rising wedge that has formed there since the 1737 low. I’ll be watching this pattern for signs of breakdown today. if it does break down today I would be looking for likely support in the 1799 (Jan 30 high) to 1802 (daily middle band) area. SPX 15min chart. The stats don’t favor a retest of the weekly middle band (1789), but we could see that on a break under 1799. SPX 15min chart:
I have 60min charts on Dow, TRAN and NDX that I have prepared this morning but I’ll be posting them on twitter before the open as I am trying to keep the charts in my morning posts down to six both to save time and help my readers with shorter attention spans.
On other markets Gold is testing the 150 DMA and this is a critical inflection point. If gold can recover over the 150 DMA and hold it then most likely gold and the rest of the precious metals complex is back in a bull market and I’ll be seeing this as very possibly the buying opportunity of the year. Watching this with great interest. Gold daily chart:
Oil is testing triangle and double-bottom resistance at 100.75. This could break either way and will likely break hard whichever way it goes. WTIC daily chart:
TNX has broken up from the falling channel from the highs, weakening the larger bear setup on bond yields. I’ll be watching this carefully to see whether TNX can return to the highs. TNX is in virgin territory to an extent here as, while we saw huge bond rallies at the ends of QE1 and QE2, both of those ended without a taper. There will most likely be a big rally on bonds when QE3 ends but it’s harder this time to identify that QE3 end point. In the interim we could see new highs on TNX and I’ll be moving back down to shorter term charts to call direction as the bond yield apocalypse seems to be receding for the moment. TNX 60min chart:
If we see yesterday’s highs taken out today I’ll be watching to see whether that delivers negative divergence on the SPX 60min RSI. If so that would favor a retracement shortly thereafter. I have only one remaining significant resistance level on ES/SPX before a retest of the highs and that is in the 1824-8 ES and 1828-32 SPX area, at the bottom of the range established after the 1850 SPX high. I’ll be watching for possible resistance there if we reach it today. Yesterday was a trend up day so the odds favor some retracement or consolidation today.