Whiplash Decline

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Another whiplash day on Friday with a strong rally to 1986. That looked more bullish than it should have done because, rather than rally in the morning and close weak, the rally was in the afternoon and closed strong. Nonetheless the high was in the 1980-9 target range I gave in the morning, and anyone buying that high on Friday afternoon is very heavily down so far this morning. SPX daily chart:

140929 SPX Daily Trendlines BBs MAs

However the high on Friday afternoon didn’t hit the obvious trendline target, which was at falling megaphone resistance. Surprises are likely to be on the downside in a move like this, but we may well see SPX return to test that megaphone resistance trendline today or tomorrow. SPX 60min chart:

140929 SPX 60min Falling Megaphone

There is a similar untested megaphone resistance trendline on Dow. INDU 60min chart:

140929 Dow 60min Falling Megaphone

There is another similar untested megaphone resistance trendline on NDX. NDX 60min chart:

140929 NDX 60min Falling Megaphone

USD has been trending up hard, and is now close to the test of declining resistance from the 1985 high. There is strong resistance there and we may well see a reversal at that test, though if that breaks I have next strong resistance in the 88.7 area. That 88.7 resistance is double bottom resistance on a pattern that would target the 105 area on a break above it, but I’d be expecting a reversal at that double bottom resistance at the first test. USD daily chart:

140929 USD Monthly Chart from 1980

At the time of writing ES is down 17 points from the close on Friday. That’s a big opening gap, and I’m doubtful about seeing that gap fill today, regardless of the obvious unfinished business above. However I would usually expect to see at least a test from below of the SPX daily lower band, and that’s at 1974 at Friday’s close and might close as low as 1969/70 today. That argues for a likely rally to at least that level in trading hours today. Beyond that the double-top target is at 1937.70 SPX and I’m not seeing anything to suggest that won’t be made. As long as falling megaphone resistance, currently at 1990, and the 50 hour MA, currently at 1992, on SPX remain unbroken, I’ll be assuming that target will be made.