In my last post on Monday 30th December I was looking at the options after the big rally from the lows over the previous week. I referred to the prediction I made in my post on 20th December looking for the rally and then lower lows:
‘How long might this rally last? Well given that today is 20th December I’m thinking this rally may well take us into Xmas and fairly shortly thereafter into lower lows. We shall see. ‘
We have now seen those lower lows on US indices and the question now is what happens next. I see two obvious main options here and was looking at these in detail in my premarket video yesterday morning.
There is a decent case here for a break up into a retest of the all time highs on SPX & QQQ, possibly DIA too. So let’s look at that.
On the SPX hourly chart there is obviously the possible H&S forming that I was looking at in my last post, and that’s still in play, but you can see the very nice three touch declining resistance trendline from the current all time high area, and on the bull scenario here that would be bull flag resistance of course.
SPX 60min chart:
There is no obvious topping setup on the Qs, but there is a very nice looking bull flag wedge that has had a first break up and may follow through to the target at the retest of the all time high. When that is seen, as with SPX, that could well be the second high of a double top.
QQQ 60min chart:
On DIA there is no obvious topping pattern, though of course that could easily be fixed with a retest of the all time high there too. DIA is still struggling to get off the lows but there’s a nice double bottom setup here that could deliver a move back to the ATH.
DIA 60min chart:
There is a double top on IWM that has broken down with a target in the 206-9 range. That may still make target, but there is also a smaller double bottom that has already broken up with a target in the 234 area. That may fail but it has a shot.
IWM 60min chart:
On The IWM daily chart the rally so far is failing at the obvious resistance at the daily middle band, currently in the 226.61 area. If that can be broken and converted then there is a good chance that the double bottom on the chart above reaches target. There are also fixed daily RSI 14 and RSI 5 buy signals which are a reason to look higher, though I’d note that there are no matching signals on the other US indices.
IWM daily chart:
SPX is also testing the daily middle band, currently at 5981, and is failing there again so far. If SPX can convert that to support then the next obvious target would be the all time high retest. If SPX keeps failing there I’d expect new lows in the next few days, and very possibly a lot lower.
SPX daily chart:
One way or another I think we’ll be seeing lower soon and I’m not expecting this to be a good year for US equities. The last two years have been banner years for US equities. A third straight year of these kinds of gains looks like a big stretch.
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