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I was writing on Friday about the nice looking rally setup on SPX and NDX particularly but obviously SPX was close to first resistance at the daily middle band and I was doubtful about that being broken on Friday, and it wasn’t broken then, or indeed yesterday.
This morning though, SPX has gapped over the daily middle band, currently at 3059, and the next targets to the upside have opened up, though this rally may reached a sudden end tomorrow at FOMC when, in all probability, the Fed will fail to announce that interest rate policy will be softened over the rest of the year.
I had been reading on and off for a month or so that ChatGPT had been forecasting a market crash on the Ides of March this year, and so was watching that with very mild interest yesterday to see whether this latest claimant to the Nostradamus throne might have any luck, but the day passed without a crash as expected. Predicting apocalypse is a famously tricky endeavour. Better luck next time I guess.
I was saying on Wednesday that the decent looking bullish setup was still there, but in the light of the Fed Chairman’s candid comments about future policy over the last few days a significant drive higher was looking improbable. I was looking for a test of weekly pivot at 4007 and then a fail there if we were going to see the bull scenario fail. SPX made it back to 4017 and failed hard, so the bull scenario, while not quite entirely dead, is now looking increasingly unlikely.
We saw the breakdown on SPX that I was warning about on my last post, and so far SPX is finding support in the 4000 area, which is the obvious support level as there is an intersection of decent support levels here. There are hourly buy signals fixed overnight on all of the six equity index futures I track on a daily basis and, subject to FOMC today, the pressure to deliver a rally today is strong.
The only support level not yet quite tested is rising wedge support from the 2022 low, and I’m wondering whether that, currently in the 3965 area, might need a test before the rally that we should see here. If we do see a test of that trendline and it holds, then that will open wedge resistance, currently in the 4240 area, as a possible target.
The possible H&S I was looking at on Friday morning didn’t form and the move to retest the prior high has done some interesting technical damage to the bear case, so I wanted to have a look at that this morning.
The SPX hourly chart below shows the break over declining resistance from the all time high, which held perfectly at the December highs and established a high quality three touch resistance trendline.
On the bigger picture there is also a decent case that a falling wedge has formed from the all time high on SPX that could be a bull flag. That flag wedge would have underthrown bullishly at the October low and this might therefore be the start of a break up towards a possible retest of the all time high.