Here's the Bounce

SPX closed on the daily lower bollinger band for a third straight day on Friday. If we should see the same today then I'd be looking at a closing range in the 1769-72 area. However looking at the overnight action, the bounce that I was looking for late last week may well now be in progress, and resistance is therefore at the middle bollinger band in the 1795 SPX area. SPX daily chart:

The overnight action has been wild, with a spike down to 1754 (March ES) on the disappointing China PMI numbers, and then a wild 25 handle rally up to 1779.50 so far. I have ES testing declining resistance from the high there, and if that is broken then main resistance is the daily middle bollinger band in the 1786 area. ES 60min chart:

I'm currently working on the assumption that this is a rally within a downtrend, and apart from watching to see whether resistance at the daily middle bollinger band on ES and SPX holds, I'm also watching RUT and NDX which have clear targets that should not be exceeded if this is just a rally. On RUT I'm looking for a test and reversal at declining channel resistance in the 1122-4 area. A break over the channel would obviously be a strongly bullish signal. RUT 60min chart:

On NDX I mentioned the possible H&S forming there on twitter on Friday afternoon and if that continues to form, the ideal right shoulder high would be in the 3500 area. On a conviction break above 3500 this scenario becomes less likely. NDX 60min chart:

One last thing to mention on equities today was that the closing pattern on Friday on the SPX 15min chart was very clearly a well formed descending triangle. These break down 64% of the time and if ES should manage to retrace back below 1774 by the open then that this is a 64% bearish pattern should still be borne in mind despite the strong rally overnight. The target on a break down would be the 1762.5 SPX area, and the target on a break up would be the 1789.50 area. I'm expecting this to break up today but if the open is weaker than expected then this might still go the other way. SPX 15min chart:

On other markets the IHS right shoulder that I suggested a few days ago might form on CL has reached the ideal right shoulder low and reversed there. If this pattern should now break up I would have a target in the 106.5 area. CL daily chart:

Could this be the start of a Santa Rally? Yes, but there has been very significant technical damage done last week and I would be assuming that this is a counter-trend rally until demonstrated otherwise. The bulls need to break over the daily middle bollinger band on SPX and also break the declining channel on RUT to open this up as a scenario.