Leaning Long

SPX broke back above the daily lower band yesterday and delivered a 27 point bounce from the lows, before giving much of that back overnight. There are arguments both ways for direction today. The arguments for the short side are that the 60min RSI 14 reached 50, which is a natural reversal level and the obvious level to reverse at to deliver positive RSI divergence at a retest of the lows. The falling channel on RUT also argues for a test of the lows next. I have two bull/bear levels that I'll be watching today carefully in regular trading hours (RTH) and those are the 1925 ES level (1930 SPX area) at the ES 50 hour MA, and the SPX daily lower band at 1934.

For the moment SPX is still riding the lower band down, but the lower band is no longer strong resistance after being broken yesterday. If SPX can break back above the lower band again today then there is an obvious target above at the 50 DMA at 1954. If SPX can't break back over the lower band at 1934 then the double top target at 1914 may well be tested, and key support for today would be at the weekly middle band and the 100 DMA at 1911/2. SPX daily chart:

The short term pattern setup has me leaning long assuming that the open this morning avoids building on the overnight weakness. I have a decent looking falling channel on SPX that would allow a test of the 50 DMA within it, and an open double top target in the 1947/8 area, which would deliver SPX close to that test. For this scenario SPX needs to avoid spending much time under broken double bottom resistance at 1932 this morning. SPX 15min chart:

The falling channel on RUT favors a hit of channel support in the 1082-90 area before the next hit of channel resistance, but there is also a small double bottom on RUT targeting the 1132/3 area. As with SPX though, broken double bottom resistance at 1120 needs to be respected and a strong break back below it would seriously weaken the pattern. RUT 60min chart:

My TLT rising channel from my late July projection is holding well. Unless the channel breaks I'm expecting significant further upside on bonds soon. TLT daily chart:

I'm very much in two minds about likely direction today. As long as SPX can hold the 1930 area this morning then my bias is long with a likely target area 1948-54. If 1930 SPX is broken with confidence then I'll be looking for a hit of the open double top target at 1914 and a possible test of strong support in the 1911/2 area.