Breaking Glass

I was saying on Friday morning that the bear case shouldn't be written off yet and, well here we are. The bounce failed at the 50 hour MA and SPX made a new low, closing well below the daily middle band.

In terms of past RSI 5 / NYMO sell signals the situation is improved as the decline is now larger than two of the 29 sell signal declines back to the start of 2007, and I'd also note that SPX and Dow also made the 38.2% fib retracement levels at the low on Friday, if this turns out to be a wave 4 retracement.

Looking at the US indices, the one that springs to the eye with a very decent quality pattern is the Dow, and I posted the Dow falling wedge on twitter on Friday night. This is a model pattern, and it overthrew slightly at the low on Friday to touched the 38.2% fib retracement level. The obvious next move within this pattern would be to wedge resistance in the 17025 area, and if it then broke up this retracement would most likely be over. This is a 70% bullish pattern, but of course that means that these patterns break down 30% of the time. On a break down the target would be in the 16750 area. Dow 15min chart:

I don't have as good a read on the SPX 60min chart, but I said last week that the downtrend should only break above the hourly 50 MA after it had bottomed out and that remains the case after the failure there on Friday morning. There is a possible double bottom setup in play that would target the 2014 area on a break back over 1998. SPX 60min chart:

On the SPX daily chart I would note the clear break of the daily middle band. If we see more downside today then that opens up the 50 DMA at 1972.5 and the lower band at 1968.5 as targets. SPX daily chart:

TLT gapped under rising support from 99.16 on Friday morning and that breaks the 2014 uptrend. I have a double top target in the 111 area, and possible H&S necklines in the 112.8 and 109.8 areas. I'll be doing a follow-up post on bonds later this week to look at the bigger picture on bonds. TLT daily chart:

Oil is retesting last week's lows, and more importantly is testing double top support on a pattern that would target the 70 area. Given the strong bull run on USD this is a possibility to watch. WTIC daily chart:

For today I'm mainly watching the falling wedge on Dow. The obvious next target is falling wedge resistance and if that pattern breaks up then this retracement is most likely over. If it breaks down then this retracement may well then extend into the 1940s on SPX.