The First Five Trading Days Of January

The holidays are ending and volume should be coming back into markets next week as players return. New Year's Day on Wednesday is obviously a holiday as well, and the five trading days after that will be closely watched to deliver an indication of how the rest of 2020 might go. I'll be looking at that stat closely later in this post but first I'll review SPX and NDX and the position as traders return for the last two trading days of 2019. I would note again that the last trading day of the year is the only historically strongly bearish day in December, with SPX closing down 67% of the time, and Nasdaq down 15 of the last 19 years.

I have a couple of quick announcements to make as well, the first being that Stan and I are doing our end of year free public webinar looking into the year ahead an hour after the regular trading hours close tomorrow (Monday). If you'd like to attend you can register for that here. We'll also be doing our usual monthly free public Chart Chat next Sunday I think and I'll post that link on my twitter feed once I have it. Lastly we are still running our annual Xmas sale on annual subscriptions at 20% off the usual price, so at a 33.33% total discount. That's drawing to a close so if you are interested you should check that out here. On to the markets.

On SPX the daily chart on Friday closed with both the RSI 14 and RSI 5 at high levels, suggesting at least a retracement soon, and some negative divergence on NYMO, setting up a possible RSI 5 / NYMO daily sell signal if SPX retraces a bit and then retests the high to set up negative RSI divergence on both RSI 14 and RSI 5. Decent odds we see that play out over the next few days.

SPX daily chart:

On the hourly chart SPX is testing support on the short term rising wedge from the 3070 low. An RSI 5 sell signal has fixed and an RSI 14 sell signal is brewing. On a break down I'd expect this setup to deliver a retest early next week of key short term trend support at the 50 hour MA, which closed Friday at 3218. From there ideally SPX would make a marginal new all time high and then fail into a larger move down.

SPX 60min chart:

On NDX the daily chart looks similar to SPX on RSI, and I'd expect the same retrace and high retest scenario there. I'd note though that the current high is at high quality shorter and longer term rising wedge resistance, and any higher high we see on NDX may therefore be very marginal before NDX starts a move back to larger rising wedge support, currently in the 7900 area.

NDX daily chart:

On the hourly chart you can see that trendline resistance in more detail and I'd note that weak RSI 14 and RSI 5 sell signals have both already fixed. Obvious first support at the 50 hour MA, which closed Friday at 8682.

NDX 60min chart:

Nothing has changed on the bigger picture scenario, where we see a top forming here for a decline into April, and then likely retests of these highs from there.

Now if you have a horror of statistics you might want to stop reading here, and I'll wish you the very best for 2020, as I'll next be having a look at the famous traditional first five days of January as a predictor for the full year, and I'll be doing that the old fashioned way, by looking at the historical numbers.

I'm taking my numbers from my newly arrived Stock Trader's Almanac 2020, and I get a lot of the numbers I use from there, including all the historical stats for particular trading days that I refer to regularly in my posts. These are a very useful reference for traders and if you would like one then you can buy them at Amazon.

Now the stats shown for this in the Stock Trader's Almanac cover the last seventy years, including 2019, which I am happy to assume for the purposes of this analysis will close green, as it seems unlikely at the time of writing that SPX will close 2019 below the 2018 close at 2506.85. If SPX should surprise me by falling over 22.6% in the next two trading days I will need to amend my numbers slightly.

The Stock Trader's Almanac is keen on this warning system and gives it an 81.8% accuracy rate for green years from the last 44 years, with some excuses for years where special circumstances led to false signals. That's all well and good but I'm using their numbers to get a fuller view of how this stat has performed.

First I had a look at the last seventy tears in total, and I'd note first that 51 of those closed green, so 72.86% green closes is the random chance baseline against which performance needs to be measured. On that basis there were 45 green closes for the first five days of January, and of those 35 closed green, giving a performance of 77.78%, significantly better than random chance. Having said that though I felt I'd get a better view if I eliminated the three years (1970, 1984 & 1987) where the gain for the full year was less than the gain in the first five trading days of January, as counted from from that point, each of those years then closed lower, and on that basis the adjusted performance was 71.11%, performing slightly less well than random chance would suggest.

On the bear side 1950-2019 delivered 19 (or 27.14%) full year red closes, and there were 25 red closes for the first five trading days of the years in the 1950-2019 period. Of those 25 closes, eleven delivered red closes for the year, which at 44% was quite a lot better than random chance. There were no years where the red close for the year was less than the red close at the end of the first five trading days of that year.

Secondly, having noticed that this stat started with an impressive run of wins 1950-69, I stripped those out and just considered the last 50 years 1970-2019. Of these 35 years closed green (70%) and 15 closed red (30%). In terms of the first five trading days there were 33 green closes, of which 25 closed the year green, so the rate was 75.7%. I again then stripped out the three years where the full year's decline was less than the decline in the first five trading days and that accuracy rate dropped to 66.67%, again less than random chance should have delivered. Not impressive.

On the bear side there were 17 red closes for the first five trading days of the year, which translated into 6 red yearly closes. That translates into a 35.3% accuracy rate, significantly better than the 30% random expectation, but much less impressive than for the longer period including 1950-69.

Looking at the numbers I noticed that there was another impressive period for this system in 2000-9, so I looked in detail at that. For those ten years there were six green yearly closes (60%) and four red (40%). In terms of the first five trading days of those years there were five green closes, delivering four green years, so 80%, 33.33% better than the 60% for random chance, and there were five green closes delivering three red years, for a 60% accuracy rate, 50% better than the 40% for random chance. This was a banner decade for this system, and it was such an interesting decade for markets that I wondered whether this system was still famous mainly because people remember it working well then. That brings me to my last sample group, the most recent decade 2010-9.

Assuming that 2019 closes green there will have been seven green yearly closes over this period (70%) and three red closes (30%). On the first five trading days of those years eight closed green, and of those years five closed the full year green, delivering an accuracy rate of 62.5%, significantly less than the 70% that random chance would suggest. However there were only two years where the first five trading days closed red, and both of those years closed green, delivering an accuracy rate of 0%, against an expected 30% for random chance.

So what's the overall verdict here? Well in terms of green closes for the first five trading days of the years over this period, only the period 2000-9 delivered accuracy numbers that were better than random chance, which makes this January system somewhat worse than useless for predicting bullish years. The bearish year accuracy rate was generally better, but that good performance was confined to the periods 1950-69 and 2000-9. Outside those periods performance was worse than random chance would suggest, most particularly in the last ten years during which time this was entirely useless at predicting years that would close down.

Overall the positive reputation of this system seems undeserved and I'd recommend disregarding it as a predictive tool. Next week I'm planning to cover the January barometer system, which attempts to predict yearly performance from the close at the end of January. We shall see if that fares any better. Everyone have a fun New Year's Day and a great new year in 2020! :-)

Not Even A Mouse

Well the holidays are upon us, and many of those of us with lives, or even just social lives, have taken a couple of weeks off to do non-market stuff. Even the algos seem suspiciously quiet and may be taking a few days off too. I'm still here because .... well ....... it's my job, and someone has to stick around to switch off the lights and lock the doors after the last buyer has departed for the holidays. In the meantime I'm doing an update for anyone still around to read it.

Since my post a week ago SPX went higher as expected, and then went higher still. Everything is still pretty much as expected however, except that the SPX 60min sell signals failed, and the negative divergence on the daily RSI 14 was lost. As I write there are new SPX hourly RSI 14 and RSI 5 sell signals brewing, but to set up new divergence on the daily chart is likely to require a retracement and high retest to set a new daily RSI 14 sell signal brewing.

The big news on Friday however was that there was a big volume spike into Friday's high on the daily chart. These are rare and tend to signal that a significant short term high or low is being made or is close. Good to see when such a high is expected, and you can see that and the last few examples on the chart below.

Whether SPX sees much downside before some market participants return after the holiday is another question, but they should be trickling back by the end of this week, and the one unambiguously bearish day of December is the last trading day, Tuesday 31st December, and if we are to see a retracement in the first quarter of 2020 as expected, then I would usually expect to see a bearish first trading week of January to confirm that. We will see.

SPX daily chart:

In the shorter term, ES is at short term rising wedge resistance and the next obvious target within that wedge is wedge support, currently a decent match with the weekly pivot at 3210.75. A 60min sell signal fixed this morning.

ES Mar 60min chart:

NQ is also at short term rising wedge resistance and the next obvious target within that wedge is wedge support, currently in the 8680 area. A 60min sell signal fixed at lunchtime today.

NQ Mar 60min chart:

As I mentioned, there are now both RSI 14 and RSI 5 sell signals brewing on the SPX chart. The divergence is a bit hard to see on this timescale but it is definitely there and these would be high quality signals.

SPX 60min chart:

On the SPX 15min chart SPX has also hit short term rising wedge resistance and the next obvious target within that wedge would be wedge support, currently in the 3210 area. We'll see whether these targets are doable on this dull tape, but as a generally rule this setup would be a strong and immediate short setup into at least that target area and possibly as low as the SPX 50 hour MA, now in the 3190 area.

SPX 15min chart:

I'm going to be having a fairly quiet week this week but will be keeping an eye on markets when they are open. If there is anything interesting at all to report I'm planning a post at the weekend, or in any case before the end of the year.

One announcement this week is that we are running our annual end of year sale at theartofchart.net, and as well as the usual two free months for an annual membership, we are offering a further two free months on annual memberships purchased this week. Last chance until June or July next year and if you are interested then you can find that page here.

We will be doing a free public Chart Chat at the end of next week but I'll put the link to that in my next post. In the meantime, everyone have a great holiday week and if you should find yourself guiltily glancing at the market tape from time to time, know that there are market junkies even more obsessive than you keeping a close eye on the tape this week, even if there's probably not much of interest likely to happen before next week. Even I will be having a relatively light week. Everyone take care. :-)

All Targets Great And Small

A week ago I was looking at upside targets on ES and the extended target on ES was in the 3180 target, made by the close of the week. I had other upside targets too with an extended IHS target on NQ that made target at the same time, and bull flag high retests on DAX and ESTX50 that were also made. I have run out of upside targets across the main equity indices that I watch and the December high on SPX is either in or should be close. 

In the short term there is an open 60min sell signal and an attractive trendline target currently in the 3150 area, ideally to be hit on Monday before a high retest, though there is an SPX trendline target below in the 3155 area that may hold instead, as SPX is the technical dog to the ES tail from a charting perspective.

ES Dec 60min chart:

On the SPX daily chart I mentioned that new all time highs on SPX should deliver negative RSI 14 divergence and possible RSI 14 daily sell signal are now brewing on both SPX and ES. Another high retest could deliver a similar divergence on the RSI 5.

SPX daily chart:

I was a little concerned to see that on the SPX hourly chart both RSI 14 and RSI 5 sell signals fixed on Friday. That's not inconsistent with higher highs though and those might just deliver higher quality RSI divergences, ideally into the resistance trendlines crossing next week just under 3200. A break and conversion to resistance of the 50 hour MA, which closed Friday in the 3143 area, would increase the chances that the December high is already made.

SPX 60min chart:

On the 5min chart the short term pattern is a decent quality rising wedge, with the obvious next target at wedge support, which closed Friday in the 3155 area. Ideally that gets tested Monday and holds, with another test of wedge resistance delivering the next high this week.

SPX 5min chart:

There is a lot of negative divergence here over multiple timeframes, so the December high could already be in, and this is a newsbomb rich and pre-holiday market, but so far everything is going to plan. As long as that remains the case we should be in a topping process here that might well deliver one of those memorable starts to January with big declines that we see every so often. If I've been a good boy this year, then that is at the very top of my list for Santa. We shall see :-)

Forming The SPX High

I was talking about mean reversion in my post at the weekend and that was well timed, with the first spike down on Monday. The daily RSI 5 sell signal fixed and reached target and there was the first sustained break under the SPX 50 hour MA since the cross back above that in the 2920 area. So far, so good.

Now the more impatient of our trader brethren are always looking for a first sign of weakness to be followed by a wagnerian twilight of the gods with SPX falling like a rock and blood running in the streets, but in practical terms that is pretty rare, and there's no reason to expect that here, as even if we pull more than 20% into April in a technical bear market, as I think we might well, I'd expect that to just be a technical retracement on the bigger picture before higher highs.

I've looked back through the SPX data as far as that goes back and 70%+ of all significant highs and lows on SPX are some kind of double top or bottom. The decline we saw this week on SPX is what I would describe as the low before the high, a sort of warm-up spike down before the more serious high is made, and that is generally followed by a retest and new high, which I'm expecting to see next week.

On my subscriber chart last night I drew the setup on ES as an IHS which would likely break up over 3125 last night or this morning and then either run the bull scenario into a minimum all time high retest, or fail after the break into a lower low, after which we'd likely make the same all time high retest from lower down. ES has obviously gone with the bull option on this morning's strong job numbers, and the minimum IHS target is a retest of the all time high, with a possible extension target into the 3180 area.

ES Dec daily chart:

There's a similar setup on the SPX 15min chart and the possible IHS extension target there is in the 3175 area. These targets don't have to be made, but often are. One other thing that I would note from this chart is that the move up from 3070 is within a tight rising channel, and I'd expect to see a test of that short term channel support earlyish next week:

SPX 15min chart:

On the hourly chart I'm always talking about the importance the the 50 hour MA as short term trend support and resistance. That was resistance yesterday and SPX gapped over it at the open today. That will likely now be support until the next leg down has started. We should see negative RSI divergence on the hourly chart before than next move down begins.

SPX 60min chart:

On the daily chart as soon as the current all time high is retested a full possible RSI 14 daily sell signal will start brewing as well as a weekly RSI 5 sell signal. Those divergences will likely last into the next short term high and those sell signals should fix when the next leg down gets started.

SPX daily chart:

The minimum target for this move is satisfied as soon as the current all time high at 3154.26 is retested, but SPX may well run a bit higher. I mentioned the possible IHS extension targets in the 3170-80 area. I'd be surprised to see SPX much higher than that and it may well not get that far. We'll see.

The monthly free public Chart Chat covering equity indices as well the usual wide range of other market and instruments on Sunday at 4pm EST and if you'd like to attend you can register for that at our December Free Webinars page. Everyone have a great weekend :-)

Coming Soon - Mean Reversion

I've been talking in my last few posts about expecting a significant high at the end of November, to be followed by a downward cycle into April 2020, and here we are at the end of November, so how's that looking here? Well as it happens a rare and significant event happened at the close today that confirms the inflection point here and leans strongly towards seeing that retracement next.

Stan and I are from different schools of charting of course and are always looking for strong matches in our analyses across the many market that we cover at theartofchart.net as when we find them it strengthens the forecasts and this cross confirmation is a very nice one to see.

That event was NDX closing clearly above the monthly upper band at the end of November. This is a stat I've been watching for a few years now, and this has happened at the end of nine previous months (not within a monthly upper band ride) since the bursting of the tech bubble in 2000. One of those instances was at the major high in 2007. Another three were early in monthly upper band rides in 2007, 2013 and 2017. The remaining five signalled significant multi-month consolidation in late 2006 (consolidation) , early 2012 (over 5% retrace), late 2016 (consolidation), late 2017 (over 10% retrace), and mid 2018 (over 20% retrace). The odds here favor multi-month consolidation or retracement by two thirds, and over 50% in favor of a significant retracement, which would fit with the retracement that we have been talking about from the swing high we have been expecting here.

NDX monthly chart:

So where might that retracement go? Well on SPX there has also been an interesting development at the high this month, as a decent quality rising channel may now have been established from the 2009 low. If that channel resistance holds and SPX returns to channel support, then that is now just under 2300. I'm wondering whether this retracement might return to retest the December 2018 low at 2346, and perhaps establish a firm floor there, and then return to channel resistance, just tested of course, and rising at about 145 handles per year. That would be an ideal trading scenario here and it might be too much to hope that SPX would give us such an generous gift. Still that scenario will certainly be at the top of my Xmas list for Santa this year. :-)

SPX monthly chart:

In terms of the shorter term setup on SPX, the trendline that I was looking at in previous posts was the rising wedge resistance trendline from the December low last year and that has been hit and slightly overthrown, which is pretty standard for a rising wedge before it breaks down. That's looking good to the downside with rising wedge support now in the 2960 area. A high quality RSI 5 / NYMO daily sell signal is now brewing.

SPX daily chart:

On the hourly chart there is currently no negative divergence on the RSI 14, and that has me wondering about a high retest on Mon/Tues before we see a larger move down to set a possible hourly RSI 14 sell signal brewing. Key short term support is in the 3125 area at the 50 hour MA, which has not been convincingly broken since SPX crossed back above it.

SPX 60min chart:

One thing I like to see in a candidate high is a rising wedge within a larger rising wedge, as these are frequently termination patterns. In this case there is a very nice smaller rising wedge from early October and wedge resistance was hit at the high last week. Possible H&S or double top options to go lower depending on the high tomorrow, and this shorter term rising wedge support is currently in the 3128 area.

SPX 15min chart:

A couple of announcements today. The first is that we are running our annual Black Friday sale on annual memberships at theartofchart.net, which as well as the usual two free months on an annual membership is an additional 20% off. That is running until the close on Friday 6th December and if you are interested, you can find the link for that here.

The second is to mention that our next monthly free public Chart Chat is in a week on Sunday 8th December. If you'd like to attend we will be covering the usual very wide range of instruments and you can register for that on our December Free Webinars page.

So Far, So Good

I remember my father giving me an example a long time ago of the dangers of forecasting through extrapolation, and it was to imagine a man who had stepped off the top of the Empire State Building, and was overheard to murmur as he fell past the 51st story 'So Far, So Good'. The point is that regardless of how well the first part of a plan develops, one always needs to consider the possibility that it may wander significantly off track by the end. We shall see how the rest of the plan for November develops. :-)

I was saying in my premarket video this morning that I was expecting SPX to make an new all time high today, and while that might run a few handles higher, any new ATH should be marginal. So far that has delivered well.

Today's Premarket Video from theartofchart.net - Updates on ES, NQ, RTY, DAX, ESTX50, SPX, NDX, RUT, CL, NG, GC, SI, HG, ZB, DX, EURUSD, USDJPY, USDCAD, AUDUSD, KC, SB, CC, ZW, ZC, ZS:

The reason I was expecting any higher high today to be marginal was mainly based on the short term rising wedge from the 2855 low, shown on the SPX 15min chart below. As SPX has not tested wedge support since the last test of wedge support, a direct move to wedge resistance was unlikely. Coupled with other factors such as divergence and cycle expectations this is a very good place to be looking for the sharp retracement that would usually precede the more significant high that we are looking for later this month. Since I capped this chart, that rising wedge has been duly tested and has broken down.

SPX 15min chart:

On the SPX 60min chart, , if there was not already an RSI 14 sell signal fixed, then another high quality sell signal would be brewing now and close to fixing. The key supports that I am watching now are the weekly pivot at 3083.5, supported by the key 50 hour MA, currently at the same level. A break and conversion of these to resistance opens the downside for that larger retracement and I am watching that with great interest. The 50 hour MA is the key short term support level I watch on SPX and since SPX broke back above that in the 2920 area it has been support for the three significant retracements since then, not being significantly broken any of those times. If it holds as support here then that would set up another possible all time high retest next. If it breaks and converts to resistance then I would expect at least a test of the daily middle band.

SPX 60min:

The daily middle band is currently in the 3042 area, and if in turn that is broken then that opens up the main target areas for this retracement and these are the fibonacci retracement targets that I would normally expect to see on a break down from a rising wedge like the one on the 15min chart. Those target areas are the 38.2% target in the 3010 area, or the 50% (only an honorary fib level) target in the 2980 area, or the 61.8% target in the 2950 area. In this case I'm mainly looking at the 38.2% and 50% targets as the most likely.

I'd note the decent quality RSI 5 and NYMO negative divergence on the daily chart that is setting up the daily sell signal that could very much put those targets in play once that is fixed.

SPX daily chart:

After this retracement SPX should then make a new all time high and I have the ideal trendline for that marked on the hourly and daily charts, currently in the 3120-5 area but rising gently of course over time. That would likely be in the 3125-30 area by the end of November.

If you missed our monthly public Chart Chat then you can see the recording on our November Free Webinars page here. I'd also mention the FAANG stocks and key sectors webinar that we are doing after the close on Thursday next week. You can register for that on the same page if you are interested.

Upside Targets

As I was saying in my last post, SPX should be back into an upwards cycle by the end of October and that would be likely to end by the end of November. SPX has duly now made new all time highs and is likely to go higher. Let's have a look at the most obvious target area.

On SPX the initial rising wedge from the 2346 low is likely expanding into a larger rising wedge. Rising wedge support is now therefore in the 2915 area. The obvious overall target would then be the original rising wedge resistance, now in the 3110 area, and due to be in the 3130 area by the end of November. I would note the interesting fibonacci relationship here, in that if you take the move from the December low to the June low, and then add the same again to the June low, then the sum is 3111, which strengthens this area as a swing high target.

SPX daily chart:

Obviously after the strong move up over the last two trading days that target area is pretty close, and it could be that we are going to see the first test of that soon and then spend the rest of November topping out. We'll see.

SPX 60min chart:

There is an obvious target for this move on NDX as well, and I was interested to see that was hit this morning. That could be the start of a bearish overthrow, or NDX could be expanding up into an alternate resistance trendline. What is obvious though is that at the close on Friday there was a lot of negative divergence on the hourly and daily charts and by the close tonight most or all of that divergence will have been lost. SPX and NDX may well have higher to go this week.

NDX 60min chart:

Stan and I are doing three free public webinars at theartofchart.net this week, all of which are well worth attending if you are so inclined, and all of which can be found on our November Free Webinars page. The first is after the close on Wednesday at 5pm EST, and is a special webinar with Striker Securities looking at the history of the futures and commodity markets. One for the market history buffs, of which I am definitely one. The second is after the close on Thursday again at 5pm EST, and is on 'Trading Commodities - Setups And Approaches'. This is looking at some of the extremely interesting commodity trades setting up over the next year or two, in what is likely in my view to be the strongest of the main market groups over that period. The third is our monthly public Chart Chat on Sunday at 4pm EST. There we will be looking at the usual wide range of markets and instruments, and will be looking at the likely targets for the down move that we will be looking for after this current upward trend ends by the end of November.

Much Ado About Nothing

ES has spent the whole of October in a low cycle but so far the action has been all sideways, with a strong rally last week taking SPX back close to the highs on the hope of a China deal. There was a China deal, albeit more of a glorified breathing space while more talks continue on the many tricky points of contention on which there seems to have been little or no progress so far, and there was good news for Soy and Lean Hogs, which are now cleared for purchase by China. With the asian swine epidemic having had such a severe effect on herds Lean Hogs particularly look like a very interesting long here.

In terms of equities though it's hard to see much holding SPX up here in the wake of the China talks, and with the low window having extended somewhat due to this sideways action, SPX is still in a low cycle until the last week of October, before a high cycle into late November and then a low cycle into March/April next year. The pattern setup looks good for a decline into the low window and I'm leaning towards a subsequent all time high retest into the high window at the end of November, possibly to make the second high of a double top.

In the short term ES formed a high quality rising wedge within a larger rising channel with the wedge breaking down on Friday. Key support is the monthly pivot at 2963.50 and ES has been trading slightly above that most of today. I'm expecting that to break, but it seems that might not happen today.

ES Dec 60min:

Ideally though that break would happen today as the daily middle band on SPX is just below monthly pivot, now at 2959, and on a break back over the daily middle band like the one we saw next Friday that is not going to be sustained, then the usual rejection back below comes in the form of a strong rejection candle on the next trading day. If the middle band is backtested today and holds as support, then we could well see a retest of Friday's high next.

SPX daily chart:

Is there a case for going a bit higher before going lower? Well yes. SPX could be forming an overall  bullish triangle here and, if so, the next obvious target would be triangle resistance, now in the 3015-20 area, before a retracement that might then only take SPX back halfway to triangle support in the 2830-5 area. That's a possible scenario here, but not the likeliest one. The setup for more downside without that however would be much improved by a break and conversion of the 2960 area back to resistance.

SPX 60min chart:

One way or the other SPX will likely move back onto an up cycle by the end of October , and the longer SPX spends going sideways in the meantime, the less ambitious any downside target should be. If we see a definite turn down in the next day or two then a target back in the 2800 area still looks doable.

Onwards And Downwards

It's been a while since my last post and my apologies for that. It has been an intense summer of medical treatments for my wife, exams and results for my children, computer upgrades and so on. I've been feeling somewhat drained.

However the market has so far avoided being as tedious as it often is at this time of year, and, if I'm not much mistaken, then the next leg down on equities has started this morning from a short term reversal setup that is really one of the nicest that I have seen in quite a while. I was going through that in detail across SPX, ES, NQ, RTY, DAX and ESTX50 in the video below before the open this morning.

Today's Premarket Video from theartofchart.net - Updates on ES, NQ, RTY, DAX, ESTX50, SPX, NDX, RUT, CL, NG, GC, SI, HG, ZB, DX, :

The rising wedge that I was looking at on ES before the open has now broken down, and ES should now be on the way to short term double top support at Friday's low 2894. A sustained break below looks for the 2848 area.

ES Sep 60min chart:

I still have an open target below at the 2822.13 SPX retest and that is a 5dma Three Day Rule target, which was just missed on the last swing down because a triangle is likely forming here. In the cases of the previous two times this has happened since the start of 2007, that target was not hit before the retest of the previous highs (all time high in the current case), but they were both bullish triangles. This one should be a bearish triangle, so the 2822 target should be hit on the way to the next downside targets.

SPX 5dma chart:

I have sketched in the likely triangle on SPX and the obvious target for the wave D low is currently in the 2830 area. I'd then be looking for a limited rally, perhaps into the 2850-70 area, before the triangle break down, ideally towards the 2730 area for a more serious low there.

SPX 60min chart:

Stan and I are doing two free public webinars tonight, and if you are interested in attending either, or both, you can sign up for those on our August Free Webinars page. The first webinar is at the RTH close, 4pm EST, on My Favorite Setups Using Futures And Options - Part 3', and the second at 5pm EST is our monthly free webinars on FAANG stocks and key sectors.

A Decent Start

SPX delivered some wild moves this week, helped along by the White House Staff's ongoing failure to gain control of the President's twitter account, but at the end of the week SPX has reached the obvious first target at a test of the 2915 support area, and there is a short term inflection point here. This is the retest of the late June low, just above a big open gap from 2889.67, and is a possible H&S neckline area. If SPX was to rally from here the ideal right shoulder high would be in the 2964 area, and that would set up a possible H&S that on a sustained break down would look for the 2800 area, with obvious serious support on the way at rising wedge support, currently in the 2870 area.

Support for a rally here also comes in the form of today's break below the 3sd daily lower band, which generally delivers a decent bounce short term, subject to further unexpected tweets over the weekend of course.

SPX daily chart:

SPX 60min chart:

Everyone have a great weekend. :-)

Topping Out Here ........ Probably

In my premarket video this morning for daily video service at theartofchart.net I was saying that until demonstrated otherwise I was expecting to see all time retests on ES and NQ before a possible swing high (and potential significant top). That high retest is at 3027.75 on ES and the high today so far has just missed that by 2 handles so far. That full test is likely needed before the turn. There is a very nicely formed nested double top setup formed on ES and SPX and that just needs a decent turn down to set the next move in motion.

ES Sep 60min:

The equivalent target on NQ is 8051.75, again not yet reached.

NQ Sep 60min:

In terms of the overall structure from the December low SPX is just under rising wedge resistance and this would be an excellent fail area, though wedges can overthrow of course, and I do have a possible alternate wedge resistance trendline now in the 3045 area. There's no negative divergence on the hourly chart here but ......

SPX 60min chart:

.... there is plenty on the daily chart, with the RSI 5 sell signal already fixed and a possible weak RSI 14 sell signal now brewing. This is a solid looking setup just waiting for the actual turn, though it's hard to overstate the importance of seeing that actual turn of course. Sweet setups don't always deliver.

SPX daily chart:

Stan and I did two free public webinars yesterday on the Big Five and Sectors (AAPL, AMZN, FB, GOOG, NFLX, TSLA, IBB, IYR, XLE, XLF, XLK & XRT), and the second on favorite setups using futures and options. Both are posted on our July Free Webinars page if you'd like to see those.

Everyone have a great weekend :-)

Daily Sell Signals Have Fixed

The daily RSI 5 / NYMO sell signal that was brewing last week has fixed on this first decline from the all time high and has not yet reached target. The rising wedge has broken down into a test of the daily middle band so far, and I am looking for a reversal pattern to form. The obvious options are either to retest the all time high to make the second high of a small double top or to head further down towards the 2964 area and the possible H&S neckline there.

SPX daily chart:

I was talking on our free public 'favorite setups' webinar last night about the importance of the 50 hour MA on SPX, and that was resistance on SPX at the high yesterday, and while that was broken slightly at the highs today, that was not converted back to support and has rejected late in the day. The obvious next target for me is another test of the daily middle band, now at 2973, and a likely break down towards the mid 2960 area and the possible H&S neckline support there.

SPX 60min chart:

ES broke back over the weekly pivot today but failed to convert that to support either.

ES Sep 60min:

Stan and I did a free public webinar yesterday looking at some of our favorite setups. If you missed that you can see the recording on our July Free Webinars Page. We looked at examples of charts from this week and if you watch the video you can see how the setups we looked at delivered nicely today.

Neither Stan or I spends much time talking about setups we look at in these webinars in retrospect, as we both feel that it seems like boasting, and there is already plenty of that on twitter without us pitching in. It also smacks of vanity, which can be a fatal flaw in any analyst. That said, our marketing people point out that referring back to past successes might be be better described as marketing rather than bragging, so that being the case I'll talk quickly about the two setups that I was talking about last night in the webinar, and that you can see on that recording.

The first setup was buying or selling the 50 hour MA in a backtest during the trend, and obviously you can see the reaction to the fail at the SPX 50 hour MA today. The other setup I looked at was the double bottom on CL yesterday afternoon. I was looking at that on positive RSI divergence, and noting that the double bottom target in the 56.50 area was both a strong match with a 61.8% retracement of the last leg down, and with a test of the monthly pivot at 56.46. I was saying that CL was a decent looking long into that target and an interesting short when it got there. The overnight high was at 56.49 and the subsequent low today was 55.12 so both were nice calls. We do a lot of nice calls but don't usually mention them, but my point is that the free public webinars are always worth watching IMO.

Everyone have a great weekend :-)

Daily Sell Signals Now Brewing

In my post last Friday I was talking about the likely retest coming of the new all time high on SPX (and ES), and how that should set possible daily RSI sell signals brewing on SPX (and ES). We saw that ATH retest and marginal new ATH this morning and I am now looking for a high. It is possible that SPX/ES might go a bit higher but I wouldn't expect much higher and I'd note that there is already a decent quality double top setup here and that on a sustained break below 2964 the double top target would be in the 2923 area.

ES Sep 60min chart:

On SPX the smaller rising wedge has broken down but it is still possible that the larger wedge resistance trendline might be a target. That is now in the 3025 area.

SPX 60min chart:

On the daily chart we now see the RSI topping configuration that I was looking for to form in my last post. Today is the middle of this high window so i am looking for a high to form. The key support level I am watching for support here is the level that held at the low yesterday, at the 50 hour MA on SPX, now in the 2971 area.

SPX daily chart:

If you missed Chart Chat on Sunday you can see the recording posted on our July Free Webinars page.

Coming Into The High Window

Apologies for the long delay between posts. My wife has been having a serious health issue including some surgery so I have been very distracted.

In my last post I was looking for another high retest, and we have seen that, with a push this week into the psychologically important 3000 area after the close on Friday. So what now? Well the next high window slipped back from late June into the middle of next week, and we are looking for a significant high, and very possibly the 2019 high, to form in this area. In the short term I'm expecting SPX to test the new ATH on ES and I have a high quality possible rising wedge trendline currently in the 3005-10 area which would be a solid match with that.

SPX 60min chart:

On the daily chart a possible daily RSI 5 sell signal is now brewing, and that high retest might well set an RSI 14 sell signal brewing as well.

SPX daily chart:

On NDX a marginal new ATH has been made and there is now a near perfect nested double top setup for what could be a very serious pullback. Again a possible daily RSI 5 sell signal is brewing.

NDX daily chart:

Stan and I are doing our monthly free public Chart Chat on Sunday, and if you'd like to attend you can register for that on our July Free Webinars page. Our annual July 4th sale is also on until the end of this week and if you are interested in picking up a discounted annual subscription you can do that here. Everyone have a great weekend :-)

Sometimes It's Just a Flag

SPX made a high early this week, broke down from a decent quality falling wedge and the obvious retracement targets were either the 38.2% or 50% retracements in either the 2840 or 2820 areas before another likely leg up.

Sometimes however any initially promising looking topping pattern evolves into a flag as the index trades gently sideways to down, and so far at least, that is what has been happening here. SPX may yet make a lower low, unless this is a triangle forming here, in which case SPX would likely test triangle support in the 2876-8 area before breaking up into a new high for June. If we are going to see a full retest of the all time high, I would expect to see that on this leg up into the next high window in the last few days of June, and then likely lower.

SPX 15min chart:

On the hourly chart the RSI 5 sell signal reached target and the RSI 14 sell signal reached the 50 level, which is often support before another higher high on price and lower high on RSI. Looking for that next.

SPX 60min chart:

On the daily chart the retracement has tested the 50dma and found support there so far. A higher high on SPX would likely set a possible RSI 5 sell signal brewing, though if that leg up reaches the retest of the all time high then this modest negative RSI 5 divergence might not survive that far.

SPX daily chart:

Everyone have a great weekend. :-)