The 5dma Three Day Rule – Day Three

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Today is Day Three on the 5dma Three Day Rule and SPX is testing important resistance on a lot of negative divergence, with an RSI 5 sell signal brewing on the hourly chart. There are also 60min RSI 14 sell signals fixed on ES and TF, with another brewing on NQ. This test of the daily middle band may well be the last really decent chance for bears this week, and what they need to do is reject from the daily middle band at 2364/5 and close enough below it to break the 5dma at 2354/5. This is a nice setup and that could happen. The bulls need a close above the daily middle band ideally, and a close on or above the 5dma at minimum. SPX daily 5dma chart:

170330 SPX Daily 5dma

SPX daily chart:

170330 SPX Daily

On ES the IHS has formed with an undersized right shoulder and broken up. On a sustained break up the target is at the ATH retest but on a hard fail back below yesterday’s low at 2348.75 this might well be a Jack In The Box bear flag setup looking for a full retest of Monday’s low at 2322. ES Jun 60min (premarket) chart:

170330 AM ES Jun 60min

Since I capped this chart at the open NQ has made a new ATH on negative divergence and there is an impressive topping setup if a bear can be located to take advantage of it. NQ Jun 60min chart:

170330 AM NQ Jun 60min

TF has made the higher high that I was looking for before the open at the test of falling megaphone resistance and if that trendline holds the next target within the megaphone would be back at megaphone support, currently in the 1315 area. TF Jun 60min chart:

170330 AM TF Jun 60min

This isn’t the last promising possible inflection point for bears to turn equities back down, that would be tomorrow if bulls manage a closing break above the daily middle band today. At that point the setup wouldn’t be as good as this one, but we could still see ES reverse at megaphone resistance in the 2380 area and bears would need to close SPX back below the middle band with a rejection candle reversing most or all of today’s move. I like the setup today though and at the time of writing the bears are in with a serious chance. If they are to deliver on that they really need to aim for a close under 2348 ES today (approx 2351 SPX). We’ll see what they can manage.

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