The Daily Middle Band

Friday was more bullish than I expected but resistance at 1937 held on repeated tests and if we are to see an opening gap today, then it seems likely at the time of writing that it will be a gap down. The SPX 50 hour MA is now at 1939 and is still primary resistance. In the event that is broken then main rising wedge resistance is in the 1947 area. I'm expecting more downside today however.

I think this retracement may develop into something substantial if the bears can develop some momentum, and we'll see whether they can. At minimum though I'm looking for a test of the SPX daily middle bollinger band, which closed yesterday at 1918, and that target could be hit today. This is a target that is often pinocchioed intra-day, so it's important not to read too much into a break below it unless that persists into the close. SPX daily chart:

In the event that the daily middle band is broken, then the next trendline target is channel support in the 1903 area, and below that the 50 DMA at 1889, and main rising wedge support in the 1882 area. If SPX should reach rising wedge support then the overthrow at the last high means that rising wedge support may well break down at the next test, opening up targets further down. SPX 60min chart:

NDX is supportive of a continuing downtrend, with the obvious target there at rising channel support in the 3670 area. NDX 60min chart:

RUT is also still supportive of a continuing downtrend, with rising megaphone support in the 1145 area. That support however isn't far away and I'll be watching that carefully with SPX today. RUT 60min:

I've been giving the TNX chart some serious thought over the weekend and my lean is still bearish yields / bullish bonds here. TNX broke briefly over falling wedge resistance, but seems to be forming a double-top there that would take it back to wedge support. That retrace is supported by the 60min RSI 14 so I'll be assuming that plays out until we see strong evidence to the contrary. If TNX does return to wedge support then the short-lived break over wedge resistance will look like a bearish overthrow favoring a break down from the wedge. If we see that happen then that puts TNX firmly on the next leg of the very bearish yields and bullish bonds path that I outlined at the beginning of January (to general disbelief) and which has been playing out pretty much as I expected then so far. TNX 60min chart:

I've also been looking carefully at the oil charts over the weekend and on the WTIC chart the current setup is very clear. Oil is within a decent rising channel and has broken up from a clear ascending triangle. The target is a retest of the 2013 high at 112.24 and there is a setup here to take oil to a retest of the 2008 high at 145 if oil breaks up there. With a following wind from Al-Qaeda I'm expecting to see that test at 112.24 in the near future. WTIC daily chart:

The key points to remember today are that the odds of a retest of the highs increase dramatically on a break above the 50 hour MA at 1839 SPX, so if we see that then it is time to get very cautious with shorts. I'll also be keeping a very close eye on RUT as we could see a general bounce on a test of that support trendline there. I don't yet have the short term decline pattern on SPX. I would generally identify that before a bounce though not always. As soon as I have one I will post it on twitter.