Yesterday went very well for bulls on the surface, with a retest of the daily middle band and broken triangle resistance that held very well and closed above both. On the shorter term charts though a rising wedge from 2052 confirmed the wedge support trendline, and then broke down and retested in the afternoon. These patterns break down 69% of the time and after a break like this, assuming it didn’t then break up (31% option), then I’d be looking for a double top or H&S to form then either a 38.2% to 61.8% fib retrace (continuation wedge option) or a full retracement of the wedge (reversal wedge option).
I posted the double top option on twitter last night. On this scenario I’d be looking for a retest of yesterday’s high, and then a retracement to the 38.2% fib retrace in the 2084 area. SPX 5min chart (DT scenario):
ES has broken below 2090 overnight however, so I think we are going with the H&S option, with a target in the same area as the double top option. There is strong support in the 2080-5 area and I’m expecting that to hold. If it breaks hard then SPX may potentially retrace all the way back to 2052. SPX 5min chart (HS Scenario):
On the daily chart I would very much like to see a close today at 2091/2 or better to avoid breaks of the 5 DMA and daily middle band. As long as 2080-5 holds and we see the close at 2090/1 or better then the current uptrend should just continue from there. A closing break below 2090 wouldn’t mandate more downside, but it wouldn’t be a good sign. SPX daily chart:
What Stan and I are looking for over the next few days is for support in the 2080-5 area to hold, then a move to the 2122 area where there is a big inflection point. I’m leaning long at that inflection point into the 2165-95 area, ad Stan is leaning short for a reversal back into 2040-50 range support. Which way will this go? Well the pattern structure should be clearer by then and should give us some clues. We’ll be posting updates on the way. Stan has posted an update video this morning and you can see that here.
