One of my favorite Thomas Jefferson quotes is that ‘the tree of liberty must be refreshed from time to time with the blood of patriots and tyrants’. Among other things that’s a reminder that all the powers of the state, however benign or harmless they may seem, are ultimately based on force and the threat of force, and every so often the use of violent means is inevitable either to maintain, alter or curtail that power.
What’s my point? Well markets are similar in the sense that any trend needs to be refreshed from time to time with the extraction of red ink either from those who challenge it, or those who defend it, sometimes both. In a downtrend that often involves a backtest of the daily middle band and it looks like we have another of those coming up shortly.
The SPX daily middle band is currently at 2461/2. A possible daily RSI 5 / NYMO buy signal is brewing and would likely fix on a decent break back over the middle band. SPX daily chart:
On the SPX hourly chart, a falling channel has been established from the high and SPX may well be returning to test channel resistance. That’s currently in the mid 2460s, just over the daily middle band, and there is a fixed RSI 14 buy signal to help SPX the rest of the way. SPX 60min chart:
There’s a similar setup on NDX, with another fixed RSI 14 buy signal and channel resistance currently in the 5915 area. NDX 60min chart:
On ES an asymmetric double bottom has broken up with a target in the 2460-2.5 area. ES Sep 60min chart:
The downtrend is being tested here and price will need to decide. A retest of the daily middle band is likely and rejection points lower. A confirmed break back above the daily middle band may well deliver a retest of the all time high.