Bearish Retest - Probably

I was saying yesterday morning that an hourly close much over the ES 50 hour MA at 1830.5 would suggest a retest of the highs, and well here we are. There are two options here and the first, and my preferred option, is that we are going to see the second high of a short term double-top made here. The second is that after a very minimalist retracement we are starting a new move up.

Why do I favor the bearish option? Well a string of rising wedges and channels have broken down on the US equity indices and none of those has evolved into a successor pattern such as a rising channel as far as I can see. We would also usually see a halfway decent short term topping pattern form here and while I was thinking that might well be an H&S pattern, a double-top would be just as common or more so, and this double top on SPX would target the obvious target, which is key support in the 1800 area.

So where would this second high of a double-top top out? I'd expect a higher high than Wednesday's 1847.50 SPX, and very possibly a new all time high over 1850.84. Firm resistance is at the daily upper bollinger band now at 1859 (and still falling), and I would count anything at 1852/3 or above as a technical hit of that resistance. The obvious time to see that higher high made would be today or Monday. If we do see this higher high made that would be with negative divergence on the daily RSI 5, which is my preferred reversal indicator at a reversal of any decent magnitude. SPX daily chart:

I have sketched out how that would look on the SPX 60min chart:

One chart I'll be watching here is the TRAN chart, which captures the ambiguous direction here well and may well be a good indicator for which way this breaks. On TRAN we have a large H&S forming and an obvious next target at rising support from the June low, which favors the bears here, but a possible smaller downsloping IHS is also forming, which would favor the bulls if it breaks up. If we see a sustained break up over that TRAN IHS neckline then that would strongly favor the bullish view that the low yesterday was the low for the (unexpectedly shallow) retracement that I have been looking for here. TRAN 60min chart:

Just a short post today as I have been travelling the last few hours, but I'm now back at my desk so if I see a significant downward reversal pattern/setup today I'll be posting it on twitter.