I wasn’t expecting to see the falling megaphone on SPX and the falling channel on ES break up without a budget and debt limit deal being agreed but hey, here we are. The falling megaphone on SPX has a target back at the highs, so the bulls have the pattern advantage for the moment and we shall see what they will do with that. There is an opportunity here to form an IHS in this area and we could well see a retracement to make the right shoulder on that pattern today. That could well fit with a retest of broken falling megaphone support. SPX 60min 1Mo:
Looking at the SPX 60min chart since May, I should mention that the break below the rising wedge support trendline from the June low could have been a bearish underthrow, and if we were now to see a break over wedge resistance, currently in the 1730-5 area, then that rising wedge would have an upside target in the 1900-20 area, not far below the 1965 area target from the larger rising wedge that broke up on SPX earlier this year. Worth a mention if we see further moves up from here. SPX 60min 6Mo:
On the SPX daily chart the close yesterday was on the daily middle bollinger band, closing just 0.03 points above it. If we see a break above that (closing basis) soon then there are no major MAs above, so the next target would be the upper bollinger band, currently in the 1727 area. Support for today is at the 50 DMA in the 1678.5 area, equivalent to 1672 ES. SPX daily chart:
On ES the falling channel broke up yesterday, and ES looks as though it has been topping out overnight, showing clear negative 60min RSI divergence at the high. If we see retracement today I have already noted the strong support at 1672, but would also mention the weekly S1 pivot at 1668.5 and the 50 hour MA currently in the same area. ES 60min chart:
I won’t show the gold chart this morning but that is breaking downwards here towards falling megaphone support in the 1200 area. I can’t see any reason to think that won’t be reached. Oil is also breaking downwards and if that can be sustained I have the next downside target on oil in the 91.5 to 92 area. WTIC daily chart:
Yesterday was a trend day and we would normally expect to see some consolidation or retracement after a trend day. The negative divergence on the ES 60min RSI is supportive and we have possible targets at the SPX 50 DMA and the retest of broken megaphone resistance. A retracement like this would be modestly bullish action. If the bears are going to turn the tables back on the bulls, which looks ambitious here but we need to remember that no deal on the budget and debt limit has yet been agreed, then the highs yesterday need to be a rally high and the bears need to make a conviction break back below 1670 soon. If they can’t do that then SPX will see 1700 tested next week.
