Bull Flag And Retest

I'm hoping all of you saw the bull flag channel on SPX that I posted on my twitter feed on Wednesday morning. Obviously that has played out and delivered a new high on SPX on Friday. So what now?

Well this is another inflection point of course, I'm expecting a reversal into a larger retracement to start soon but SPX could break up higher directly. The retracement low last week established a very decent looking rising channel from the last significant low at 3855, and there is plenty of room to the upside in that channel.

On the downside a break below that channel support, currently in the 4145 area, would be a good indication that the larger retracement I am thinking is likely here is in progress.

A possible double top formed at the retest of the all time high last week, and on a sustained break below last week's low at 4118 the double top target would be in the 4043 area.

SPX 15min chart:

On the hourly chart the RSI 14 sell signal reached the possible near miss target and I'm disregarding that. I'd note that rising rising from the March low is now in the 3945 area, supported  by the weekly middle band now in the 3911 area below, and the broken highs in the 3950 and 3980 areas above. If we are going to see a larger retracement, then that zone is the backtest zone that I would expect to hold if the larger retracement is just a backtest of broken resistance.

SPX 60min 15Mo chart:

On the daily chart an RSI 5 sell signal fixed last week, and an RSI 14 sell signal started brewing at the high on Friday. There are a lot of these daily signals now fixed across multiple indices and leading stocks, notably NDX, AAPL, AMZN and GOOG, and the odds are good that these can deliver that backtest, and possibly more if some key supports break on the backtest.

SPX daily chart:

NDX is still retesting the February highs and there is a possible decent sized double top formed in the event that those key supports can be broken. If we see a retest of the current all time high that might set up smaller double top that might then play out if we see the backtest that I am expecting on SPX.

NDX daily chart:

I'm wrapped up in divorce stuff most of this week but I'll try to get another post out on Friday.

Three Taps and A Punch

 After my post on Friday, SPX spiked up into the trendline I had posted on the SPX hourly chart, and that was the very nice rising wedge resistance trendline from the March 2020 low. That high was retested this morning, the level was respected and weak hourly RSI 14 and RSI 5 sell signals have now fixed.

SPX 60min 15Mo chart:

Looking through my other charts on Saturday though that was only part of the story. Friday's high on SPX was also a perfect hit on a shorter term rising wedge from the late October low.

SPX 60min 5Mo chart:

That still wasn't all though. Looking at the SPX 15min chart that high was also a perfect hit on the ideal rising wedge resistance trendline from the late April low at 3853.50, so that was three intersecting trendlines on three rising wedges on SPX nested within each other like matryoshka dolls.

Is this a setup where I would be expecting those trendlines to hold as resistance into a retracement starting here? Generally yes, though there are no certainties in analysis, or trading, or indeed in the world in general.

SPX 15min chart:

Backing up the trendlines was the strong punch above the weekly upper band at Friday's close. This generally delivers (70%)+ in last 15 years, a short term high with at least a consolidation lasting several weeks and often a retracement to the weekly middle band, currently 3850 area, or lower band, currently 3600 area.

SPX weekly chart:

Since I capped these charts the smallest SPX wedge has starting breaking down and sell signals have now fixed on both the hourly and 15min charts. A small double top has formed with on a sustained break below 4114 SPX would look for the 4099 area.

I forgot to mention on Friday that we were doing our monthly free public Chart Chat at theartofchart.net yesterday If you'd like to see that the recording is posted on our April Free Webinars page, close to the top of the page.

We are also doing a free webinar an hour after the close on Friday on 'Trading Commodities - Setups And Approaches'. If you'd like to attend you can register for that here.

I'm going to try to get back into a routine of doing two or three posts a week so I'm expecting to publish at least one more post by Friday.

Cloudbusting

 I've dropped out of sight for a while, apart from my usual work at theartofchart.net, and my apologies for that. My divorce has been playing out in the background and I've been finding that rather depressing. Hopefully in a few months it will be finished and I will be free to move on to a better future, but in the meantime it is heavy going.

I do love writing these posts though and at the very minimum it is good for me to be writing them, so I am making an effort to restart doing these often, and today is a very good day to restart.

Why is that? Well after this impressive move up over 4000 on SPX, breaking the very nice looking topping setup that had been developing below under that obvious resistance, the market could use a retracement and all the indications are that we are about to see that.

Will that be part of a larger high forming here? Who can say? The Fed isn't really pumping money in any more, but the federal government has been passing some eye-wateringly huge spending bills with more and larger ones apparently on the way. I've always wondered what it might cost if every politician was able to fund every pork project they had ever wanted, and it seems possible that within a year or two we may know the answer to that question. We'll see. In the meantime the flood of spending may push markets ever higher, and 4000 SPX could now convert into a support level. If so, the likely retracement that looks imminent here may deliver the next decent buying opportunity.

What am I seeing that is suggesting imminent retracement on the SPX chart? Well the first reason is that I drew in the next two obvious resistance trendline candidates on SPX last weekend and SPX broke over the first. The second I have in the 4115 area and I think there is a good chance that it will hold in the short term at least. The second reason is the very high quality negative divergence on the hourly RSI 14 that has formed as we have neared that target. There are a lot of those, over a lot of instruments and indices, and these appearing in significant numbers usually indicates at least a short term high, though the lack of any matching daily negative divergence also suggests strongly that these highs will be at least retested within weeks.

SPX 60min chart:

On the daily chart SPX has essentially spent the entire week about the 2sd upper band. That is very stretched. That doesn't have to end here, but with the levels and negative divergence there is a pretty decent chance that SPX will retreat back below it shortly.

There is an obvious target for that retracement of course, and that target is at a retest of the daily middle band. At the time of writing the SPX daily middle band is at 3988 and rising, so that retracement would likely be looking for a backtest of broken resistance in the 4000 area, and my lean at this stage would be that support would likely be found there.

SPX daily chart:

On NDX the main target is likely to be the retest of the 2020 high, and that target hasn't quite been reached, but the hourly negative divergence is strong, and when I was looking this morning at the usual large tech stocks I follow, AAPL, AMZN, FB, GOOG, NFLX & TSLA, the only one that didn't have a high quality hourly RSI 14 sell signal brewing was TSLA, where it had already fixed. This is something that I don't see to often, and is a strong indicator of an imminent short term high. 

NDX 60min chart:

On the NDX weekly chart there is an obvious potential topping setup forming here, and a retest of the high may be the second high of a double top. I would note the weekly RSI 14 and RSI 5 sell signals that have fixed, so is that potential here, but we'll have to see how that develops.

NDX weekly chart:

I'm hoping to manage a couple of posts next week and I'm planning for one of those to look at the long case for precious metals, which is looking compelling here in my view.

Everyone have a great weekend. :-)