I posted this chart on my twitter on Wednesday night with the comment that SPX was reaching an important short term inflection point where it might go directly into a retest of the current 2022 low. I said that the strongest kind of break would be a gap through the gap support highlighted in yellow that then converted that to resistance. We didn't see that yesterday, where the gap was tested but not filled, but at the time of writing a gap through that resistance looks likely and if the gap then converts to resistance then that would create a short term island top for the rally.
The timing isn't ideal and this attempt to break down would have been better yesterday because today is the last trading day of June, and the 4th July holiday is on Monday. That's not an issue today, with neutral historical stats, but the historical stats for tomorrow on SPX are 85% bullish and that is also both a Friday and the trading day before a holiday, so I'm skeptical about seeing any meaningful downside tomorrow. If we are going to see a retracement low retest therefore, it might need to be concluded today.
SPX 60min chart:
The first serious resistance on a rally like this is at the daily middle band, and that was tested at the rally high, so that is a very obvious level from which to see a low retest.
SPX daily BBs chart:
If we do see that low retest then that may well be the second low of a double bottom setting up a backtest of main resistance at the weekly middle band, now in the 4186 area. That would be a much larger inflection point as if SPX is going to deliver on the bull flag and retest the all time high, we would likely see a break and conversion of that to support to open the path to bull flag resistance, currently in the 4480 area.
SPX weekly chart:
On NDX the bull setup is looking very nice here, with a perfect bull flag setup and weekly positive divergence on both RSI 14 and RSI 5.
NDX weekly chart:
On the rally over the last few days there were also some very encouraging breaks up. Here is the very encouraging bull flag setup on XLP that has already broken up.
XLP daily chart:
There is an opportunity to retest the 2022 low today and I'd love to see that if it can be managed. If so I'd be looking for a very possible second low of a double bottom and that would then be backed up by the very bullish historical stats tomorrow and the modestly bullish stats Wednesday through Friday next week.
If we are going to see that then on any intraday rally I would like to see yesterday's SPX low at 3799.02 respected to leave a high quality island top in place into that retest. If SPX can break back over 3800 and convert that to support then that low retest in the next few days would be much less likely in my view.
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