Apologies for the very late post again today. Wednesday is my biggest charting night of the week at theartofchart.net and I was up until 4am. When I get to my desk every morning I also review and publish charts on currently nineteen different futures and forex pairs with a premarket video looking at any changes of interest on each. Even though I live to chart I tend to get a bit tired on Thursdays.
There’s a running trader’s joke about types of days that can set up in the morning and then play out over the rest of the trading day. It’s like a movie when you watch the first part and you have a pretty good idea how the rest plays out. Some tape movies, such as Buy The Dip movies are very common, but today’s was a rarer variety that I have christened the Vee Movie.
The Vee Movie starts as a likely trend down day and then reverses hard. It then behaves as a trend up day for the remainder of the day and today was a pretty solid example. The chart below has this illustrated with quotes from myself mainly with one comment from Stan today, mostly from our subscriber only twitter feed. Note the very trend up RSI 14 action supporting my view that these and inverted V days are in effect a continuous trend day that reverses the trend direction after the strong first move. SPX 1min chart:
What does this tell us on the hourly chart? Well support was at the top of the breakaway gap that has been support for three weeks or so now, and that’s a possible H&S neckline. SPX closed the day back over the 50 hour MA at 2394 and if this is an H&S forming, then the ideal right shoulder high would be in the 2398 area. If so the classic way to break down from this kind of breakaway move would be to gap back down through that open gap to set up an island top. The weak 60min sell signal that had fixed before the open yesterday made the possible near miss target at the low this morning. SPX 60min chart:
The ES and NQ futures charts below were done before the open for Daily Video Service subscribers at theartofchart.net. If you are interested in trying our services a 30 day free trial is available here.
The very nice bull flag channel on ES broke down and that opened the test of main short term support in the 2380 area, mentioned by Stan on the top chart. That obviously didn’t break and set up the V retracement over the remainder of the day. ES Jun 60min chart:
On NQ I was saying before the open that bears needed to break and sustain trade below 5635 to open the downside. The low today was at 5635. NQ Jun 60min chart:
On TF I was thinking yesterday and before the open today that a bear flag was forming that would likely break down and retest the early May low at 1377. That broke down and delivered a marginal lower low at 1375. That raises a very interesting possibility that the low this morning was the second low of a double bottom that on a sustained break back over 1400 would look for a retest of the all time high. TF Jun 60min chart:
So what’s the takeaway from today? We are in a range. I think that this is very likely to be a topping range and that any break above the range, if seen, is likely to be part of that top forming. If I’m right, when there is a break down from that gap support, that may well start with a breakaway gap down that isn’t filled for a few months. If that possible double bottom on TF plays out then there are good odds that that high retest on TF would be the second high of a larger double top. If that setup on TF isn’t going to play out then the swing highs on all three indices may already be in, and I’ll be watching for that breakaway gap down.