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Since my last post we have seen what may be the full backtest on SPX that I was looking at then, but might only be the first leg of that backtest The backtest did not quite reach the 3950-4025 target zone, and none of the three obvious targets were hit at the weekly middle band, currently in the 3980 area, or either of the rising support trendlines from the March 2020 and October 2020 lows (shown below), and the daily RSI 14 sell signal did not make target so I’m leaning towards another leg down, that could happen after an all time high retest to set up a possible double top.
On the bigger picture here the overall position on SPX is bullish. There has been a solid break over the big resistance level at 4000, and SPX is currently on both monthly and weekly upper band rides. There is currently no negative divergence on either of the monthly or weekly charts, with the weekly RSI 5 sell signal that had fixed having failed.
I’m hoping all of you saw the bull flag channel on SPX that I posted on my twitter feed on Wednesday morning. Obviously that has played out and delivered a new high on SPX on Friday. So what now?
Well this is another inflection point of course, I’m expecting a reversal into a larger retracement to start soon but SPX could break up higher directly. The retracement low last week established a very decent looking rising channel from the last significant low at 3855, and there is plenty of room to the upside in that channel.
On the downside a break below that channel support, currently in the 4145 area, would be a good indication that the larger retracement I am thinking is likely here is in progress.
A possible double top formed at the retest of the all time high last week, and on a sustained break below last week’s low at 4118 the double top target would be in the 4043 area.
After my post on Friday, SPX spiked up into the trendline I had posted on the SPX hourly chart, and that was the very nice rising wedge resistance trendline from the March 2020 low. That high was retested this morning, the level was respected and weak hourly RSI 14 and RSI 5 sell signals have now fixed.
I’ve dropped out of sight for a while, apart from my usual work at theartofchart.net, and my apologies for that. My divorce has been playing out in the background and I’ve been finding that rather depressing. Hopefully in a few months it will be finished and I will be free to move on to a better future, but in the meantime it is heavy going.
I do love writing these posts though and at the very minimum it is good for me to be writing them, so I am making an effort to restart doing these often, and today is a very good day to restart.
Why is that? Well after this impressive move up over 4000 on SPX, breaking the very nice looking topping setup that had been developing below under that obvious resistance, the market could use a retracement and all the indications are that we are about to see that.