Last Post for May

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Today is the last trading day of May and unless we see a really serious decline today, the monthly candles for May on NDX and SPX are going to confirm breaks above the monthly middle bands, which at the least isn’t going to do any harm to the bull case.

Shorter term SPX is still within a rising channel and is close to a test of the April high at 2111. Given that the retracement from that high was in effect a bull flag channel, that retest is the first target for that flag, and may be the second high of a double top, if SPX retraces enough after the test to break the rising channel.

What I’d add though is that all of SPX, NDX and RUT are on daily upper band ride, with NDX having closed over the daily upper band the last three trading days. In effect this is like a trend up day in that the impulse up ends when it ends. It can get very expensive counter-trend trading on both trend days and band rides, regardless of the amount of RSI divergence, though there is certainly a lot of that on both the 60min and 15min charts. SPX daily chart:

160528 SPX Daily

The pattern from the retracement low isn’t well defined, but looks like a rising wedge, which is cautiously promising for some downside soon. There are RSI 14 and RSI 5 sell signals brewing on the hourly chart, as there are also on the NDX and RUT hourly charts. All of these will fix on the first decent retracement, so there is a lot of downside risk here. SPX 60min chart:

160528 SPX 60min

I did the TF chart below last night for subscribers at TF tested the rising support trendline overnight and that’s held so far. When it breaks the short term bear case will look more promising. TF Jun 60min chart:

160530 TF Jun 60min

The test of the April highs that is happening here on SPX and RUT, though not on NDX, is an important inflection point, and there is good reason to think that these might well be the second highs of double top patterns for a deeper retracement of the move up from the February low. There is a lot of shorter term negative divergence here. We’ll see whether bears can hold the line at a retest. On a sustained higher high over 2111 the next obvious target would be the retest on SPX of the all time high at 2134.