Well I was saying yesterday morning that SPX was back on my 5dma three Day Rule, and that rule is that after a daily closing break over the 5dma that follows a 2%+ decline, SPX must close the next two days over it as well, or the low before the break up will be retested before the high before the decline.
With the clear break back below the 5dma yesterday I was saying on twitter yesterday that the very likely next move was to retest the 2042 low, and with ES currently down hard from yesterday’s close, I’m thinking that retest may well be today. SPX daily 5dma chart:
This isn’t good news for my preferred scenario here that a bullish triangle is forming on SPX. That scenario really required a test of the 2100 area and slightly lower high before the next move down, and that’s looking unlikely now. The other two options are a double top, which is my least favorite option here mainly because this is December, and a bull flag option, which would be a falling megaphone from the 2116 high. On a sustained break below the 2042 low I’d be wondering about a retest of megaphone support in the 2000 area. If seen I’d be looking for a likely reversal back up there. SPX 60min chart:
I’m not expecting a really serious decline here yet, but I was disturbed to see that RUT broke down from the rising wedge yesterday. That opens up a possible pathway back to the 2015 lows on RUT. The next big support level is possible double top support in the 1140 area. RUT daily chart:
If we are going to retest the 2042 low today then I’ll be looking for an AM high that fails, very possibly at a test of strong resistance in the 2066 area. We may see a trend down day today if we see that failed morning high.
