- WE'RE JUST RANDOM SPECKS OF DUST IN A TORNADO TO THE MARKETS .......
- CHARTISTS MUST PUT ALL BIAS ASIDE AND LET THE CHARTS DO THE TALKING OR WE'LL SEE ONLY WHAT WE WANT TO SEE
- This blog has a copy of all header posts that I publish anywhere, so that those interested in seeing what my thoughts are on the markets can find them easily.
- I will be answering questions and responding to comments, so feel free to respond to any posts and I will see your comment even if it is not on the most recent post.
- If you're interested in seeing any intraday charts I post, I do that on twitter, and my twitter handle is @shjackcharts.
- The charts in the posts are as large as I can practically make them. if you would like to look at one more closely, click on it, and the link will take you to a larger version at screencast. If you click on that again, you will get a full page version, and can use the resizing function on your browser to enlarge parts of interest further.

Friday 16 February 2024

High Retests Likely

I mentioned in my post on Tuesday morning that the historical stats for the rest of this week leaned bullish, and that the stats for next week after the holiday all lean bearish, and after the low on Tuesday afternoon we've been seeing that deliver so far.

I capped the chart below after the close on Wednesday 14th with the very decent looking rising wedge that had formed from the low on SPX, and that looked as though that might break down on Thursday 15th, delivering a decent right shoulder high on a possible H&S right shoulder.

SPX 1min (after close 14th Feb) chart:

As it happened though the wedge continued forming on Thursday, with the support trendline finally breaking in the last hour, by which point there was not much space left between the support and resistance trendlines. So where does that leave us?

Well in terms of the wedge resistance trendline, that will be crossing the all time high at lunchtime of Friday, and the break down from the wedge support this afternoon may just be setting up and secondary wedge support trendline.

While the wedge may have topped out, the rally has taken us up close enough to the retest of the all time high that I'm thinking the most likely outcome is that this is hit on Friday to make a possible second high of a double top taking SPX into the bearish stats next week.

The overall pattern setup remains the same as the one I was looking at earlier this week, so you can see that in my last post on Tuesday 13th Feb.

SPX 1min (after close 15th Feb) chart:

I'm looking for topping patterns on the other equity indices too and if NDX failed right here then that might still be an H&S, but more likely we see a retest of the all time high there too, again setting up a potential double top.

NDX daily BBs chart:

Dow is also looking like an all time high retest is likely setting up a third possible double top.

INDU daily BBs chart:

IWM is an interesting one, as I was saying on Tuesday morning that I was looking for a break of the rising channel support trendline to kill off that bullish scenario on IWM. That didn't happen, so there is still an ongoing rising channel on IWM, which has rallied very strongly from Tuesday's low and might still be heading for channel resistance.

If that isn't what is happening here though, then this looks like another high retest setting up a fourth potential double top.

IWM 60min chart:

If all of these high retest are seen today, then there is a very decent chance that this will also set up decent negative divergence on the hourly and 15min charts, to go with the daily RSI 14 sell signals already fixed on all four. If it fails right here, writing shortly before the open, then there is limited negative divergence, and the double tops don't look great, but I've seen highs like this regularly before.

If we reach those retests today that will put SPX, NDX & Dow back at the top of all these inflection points and at any inflection point there is a chance that it will break in the direction that looks less likely. If we see a retest and fail though, then there will be a series of high quality double top setups that could deliver a larger retracement over the next couple of weeks. We'll see how that goes.

In terms of historical leans, as I mentioned, there is a holiday on Monday, and the four remaining days next week all lean bearish. If we are going to see any serious downside move, next week would be a great time to do that. For today the stats lean neutral to bullish, the day is Friday, which is not a good day to look for any serious downside move generally, and there are a lot of option expiries today, so the tape may be pinned after lunch at a level that doesn't change much the rest of the day. Everyone have a great weekend. :-)

I've stopped using a custom domain for my blogger posts so the address for those has reverted back to https://channelsandpatterns.blogspot.com/

If you are enjoying my analysis and would like to see it every day (including a daily premarket video) at theartofchart.net, which I co-founded in 2015, you can register for a 30 day free trial here. It is included in the Daily Video Service, which in turn is included in the Triple Play Service.

Tuesday 13 February 2024

Taking Stock

One thing I always like to see on SPX the day after I call a possible high area is a big gap down and I wish that happened every time. Alas it does not, but it was nice to see that happen this morning.

In terms of the trendlines I was looking at in my post yesterday morning, SPX went a bit higher and hit the shorter term resistance trendline that I thought might need a hit. There was a nice rejection there that followed through hard this morning.

SPX daily BBs chart:

That delivered a very slight break over the main SPX rising megaphone resistance trendline though a break so marginal that I wouldn't call it an overthrow.

So if we are going to see the decline I'm looking for on SPX, what the the important levels to watch and key target areas?

Well the first important area on SPX is a double support level at rising support from the 4103.78 low, currently in the 4920 area, and the daily middle band, currently in the 4909 area. A break below the trendline should put us in a topping process for the move, and a break and conversion of the daily middle band to resistance opens the downside.

I'm looking for a topping pattern and that may require a high retest to set up a double top. An alternate topping pattern though might be forming with a test, and possible right shoulder bounce, of the possible H&S neckline in the 4850 area. That could set up an H&S that would look for the 4650 area.

In terms of downside targets there are two main target areas here if the wave up from the 4103.78 low has in fact now topped out. The first again is a double target and would be the bullish retracement option. By that I mean the obvious retracement option if SPX were to retrace to set up another leg higher into new all time highs and beyond.

That first target area is again a double target, and that is firstly a 50% retracement of the move up from 4103.78. I have that in the 4575 area, and that level is close to a backtest of the July 2023 high at 4607.07, an attractive target in the event that this is just a bullish retracement.

The second target is the bearish option, and that would be a test of the rising (megaphone) support trendline from the October 2022 bear market low, having just of course tested the corresponding resistance trendlines on all of SPX, NDX & Dow. That trendline is currently in the 4275 area. I'm a bit doubtful about reaching that but if we get a lot of bad news over coming weeks, then that target might be doable.

SPX daily 45dma chart:

NDX held the main resistance trendline nicely at the high yesterday, and declined to test the daily middle band in the 17478 area this morning. A break below opens a test of shorter term rising support in the 17425 area, and a break of that, and conversion of the daily middle band to resistance, opens the downside.

I'm keeping an open mind on downside targets, but would note that as with SPX and Dow, the obvious target would be at rising (wedge) support from the 2022 bear market low, currently in the 15300 area.

NDX daily BBs chart:

Dow also held the main resistance trendline nicely at the high yesterday and declined to test the daily middle band in the 38231 area this morning. A break and conversion of the daily middle band to resistance opens the downside.

I'm keeping an open mind on downside targets, but would note that as with SPX and NDX, the obvious target would be at rising (channel) support from the 2022 bear market low, currently in the 33375 area.

INDU daily BBs chart:

The IWM chart, very different to the other three, was the minority report I referred to in the title of my post yesterday morning. IWM has also been testing the daily middle band in the 195 area this morning, A break and conversion of that to resistance opens the downside there as well of course, but the level I am watching with particular interest is the support trendline on the rising channel on IWM that I was looking at yesterday morning. That is currently in the 193.5 area, and a clear break below that breaks the rising channel, which is what really opens the downside.

IWM 60min chart:

No  serious technical damage has been done on the US equity indices, but that is probably coming soon. The next big targets on the downside are the breaks and conversion of the daily middle bands on all four indices, so we'll see how that goes.

In terms of historical leans, the remaining days this week lean neutral to bullish, there is a holiday next Monday, and the four remaining days next week all lean bearish. If we are going to see any serious downside move, next week would be a great time to do that.

I've stopped using a custom domain for my blogger posts so the address for those has reverted back to https://channelsandpatterns.blogspot.com/

If you are enjoying my analysis and would like to see it every day (including a daily premarket video) at theartofchart.net, which I co-founded in 2015, you can register for a 30 day free trial here. It is included in the Daily Video Service, which in turn is included in the Triple Play Service.