Bulls inflicted a lot of technical damage yesterday, with conviction breaks over the 50dma, 200dma and daily middle band. All bulls have to do to consolidate yesterday’s gains is to hold at or above the daily middle band today. That closed yesterday at 2070. Bears regain the advantage IMO with a close below both of the 200dma at 2062 and the 50dma at 2060. Today is the third day on the 5dma Three Day Rule, so a close below the 5dma today would trigger a very likely retest of the 1993 low. the 5dma closed at 2040 yesterday but will likely close a bit higher today.
So far SPX is following the falling megaphone option that I was looking at in my morning post on Tuesday 8th December, and have been following since. You can see that post here. We have seen the triangle thrust down to megaphone support, the low at 1993 just under my 1995-2000 target zone, and then the full triangle thrust retracement back to 2067 and bulls have broken back over strong resistance in the 50dma to daily mid band zone. If bears can’t deliver a strong reversal candle back through support today, then the next move is a test of megaphone resistance, which is in the 2095-7 area today. As this megaphone is a bull flag on the bigger picture, a break up from it should then deliver a retest of the all time high at 2134, and I’d be looking for likely failure there or a little higher. SPX daily chart:
There is negative divergence here, as there also was yesterday morning. There is an open RSI 5 sell signal on the hourly chart. SPX 60min chart:
NDX was testing declining resistance from the high in the last hour yesterday. a break above that would be bullish and open up a retest of the highs. A hard failure there would look ominous for bulls. NDX 60min chart:
I don’t have a directional lean today. Bulls have to hold above the SPX daily middle band on the close today, and we’ll see if they can do that.
Just a reminder that Stan and I are doing a free to all webinar at theartofchart.net after the close with our forecasts for 2016, and a review of how we did on our forecasts a year ago. There are still some places available, but if you want to attend you should sign up ASAP to ensure that you have a place. You can do that here.
I’m planning to take the whole of next week off as I could use a break. My plan would be to resume posts on Monday 28th December.
