Testing the Water

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Another day of consolidation yesterday with two more tests of key short term support at the SPX 50 hour MA. On the second test there were significant intra-hour pinocchios below it which was new, but the hours closed safely back above. The pattern setup on the SPX 60min leans bearish but could still go either way this morning. The triangle I was looking at yesterday morning broke up and was then retesting hard at the close. For today I would expect that either to break up to a marginal new high, or break down to test the triangle target and possible H&S or double-top neckline at 1824/5. The RSI and trendline setup are leaning towards the bear outcome, and I have mentioned many times before that triangles have a very tendency to make a false break before the real move begins in the opposite direction. SPX 60min chart:

140227 SPX 60min Triangle and Topping Pattern Options

On my SPX vs NYMO and the RSI 5 chart there is clear negative divergence on both, which again looks bearish. The RSI 5 sell signal has not yet triggered by closing a day under the trough between the divergent peaks, but we are one bad day away from that happening. SPX daily chart vs NYMO and RSI:

140227 SPX Daily vs NYMO and RSI

On the SPX daily chart I have the daily upper band at 1876 though I’d be surprised to see any move over 1870 to make a new high. Daily middle bollinger band support is now in the 1808 area. SPX daily chart:

140227 SPX Daily Patterns BBs MAs

On the SPX weekly chart I have the upper bollinger band at 1866, and that should be very firm resistance into tomorrow’s close. Weekly middle band support is now at 1805. SPX weekly chart:

140227 SPX Weekly Patterns BBs MAs

On other markets TNX has finished forming the double-top I’ve been looking at and is trying to break down from it. If this plays out to target then TNX may well be making the second low of a larger double-bottom with a target at a retest of the January high. TNX 60min chart:

140227 TNX 60min Double-Top Breaking Down

On ES overnight the 50 hour MA, now at 1845.75 held well as resistance before a plunge as low as 1832.75 which has now mostly been recovered. What does this mean from a technical perspective? Not much, as what happens in trading hours is much more significant and ES is back near yesterday’s close at the time of writing. . For today I’m looking at the 1846/7 ES area and the ES 50 hour MA at 1845.75 as strong resistance and if that double resistance is broken with any confidence then I’ll be expecting at least a retest of the highs. Key support is at the SPX 50 hour MA, which closed yesterday at 1843.25 (approx 1841.5 ES), and if we see that broken with any confidence (on an hourly close basis) then I’ll be expecting a move down to the triangle target and possible H&S/double-top neckline at 1824/5 SPX. Yellen is speaking at 10am and that could obviously push markets either way.

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