Bitcoin - The Dog That Didn't Bark

Back in my post on 11th April I called the likely start of a strong rally which we then saw.

Back in my post on 12th May I called for new all time highs on Bitcoin (BTCUSD) and laid out possible IHS scenarios on both Solana (SOLUSD) and Ethereum (ETHUSD), looking for ideal right shoulder lows on Solana in the 125.43 area and on Ethereum in the 2074.27 area. That hasn’t gone quite as I drew then but essentially both are still running that scenario, though Ethereum has now reached the IHS target.

Back in my post on 23rd June I called the likely lows on those right shoulders made on Solana at 126.09 and on Ethereum at 2113.65, and was looking for that IHS scenario on both to start to play out.

Back in my post on 18th July I was looking at the IHS that had since broken up on Ethereum and the progress made towards the IHS neckline on Solana.

In my post on 22nd July I was looking for some retracement after the IHS on Solana had broken up, and looking also at the possibility that a setup for a hard fail might form in that retracement.

In my post on 4th Aug I was looking at that retracement on Solana and looking for higher highs soon which we saw. I was expecting Ethereum to reach the IHS target at 4109.05 which we saw.

In my post on 19th August I was looking at a likely retracement starting on both equities and Crypto and we’ve seen that. There is now a clear inflection point here where Crypto could rally back into retests of the recent highs, or break down further into the next targets.

In my last post on Friday I was looking at the inflection point on Bitcoin, Ethereum & Solana as we were coming into the Jackson Hole speech.

The Jackson Hole speech was positive about the prospect for an interest rate cut in September and there were some strong moves up on equities and Crypto but ……. not on Bitcoin. As a result we have another clear inflection point on Crypto this morning which I wanted to go through at the start of this week.

On the Bitcoin weekly chart an RSI 5 sell signal fixed at the close on Friday. The last four of these made the target at the 30 level on the weekly RSI 5, though in two of those cases there was another leg higher first when the decline that fixed the signal failed to break below the weekly middle band, currently at 108,010. That is therefore a very key level to watch in the next few days.

BTCUSD weekly chart:

On the Bitcoin daily chart there was a decent rally from the lows on Friday, but that failed to sustain a break over double resistance at the daily middle band and the 50dma, currently at 116,546 and 116,543 respectively.

BTCUSD daily chart:

After Bitcoin failed at resistance a lower low was made, and on the bull side on the hourly chart, there is now a possible double bottom setup that on a sustained break over the weekend high at 117.4k would currently look for the 123.1k to 123.9k area, effectively looking for a retest of the all time high at 124.5k. There is also currently a possible hourly RSI 14 buy signal brewing.

On the bear side though the double top on Bitcoin had broken down with a target in the 99k to 100k area and, after a rally, has now made a lower low. The target area for this double top is close to the 50% retracement of the move up from the April low and just above the June low at 98.3k area. This is a very nice looking retracement setup.

BTCUSD 60min chart:

On Friday morning the only one of Bitcoin, Ethereum and Solana that had a good retracement setup was Bitcoin. That has now changed. On Ethereum there was unfinished business at a retest of the 2021 all time high at 4865.94, and that was resolved with the new all time high at 4955.89 over the weekend.

With that new all time high over the weekend, a possible double top setup has formed and, on a break back below last weeks low at 4063, the double top target would be in the 3150 to 3330 area. The lower target is very close to a 50% retracement of the move up from the April low.

ETHUSD 60min chart:

Solana made a new high for August over the weekend as well and a possible double top setup has also formed there. On a break back below last weeks low at 175.68, the double top target would be in the 137 to 140 area, close to a 61.8% retracement of the move up from the April low.

SOLUSD 60min chart:

Overall this is now a much better overall retracement setup than the one I was looking at on Friday morning, and most likely we will see which way this is likely to break this week and very possibly today. If Bitcoin breaks much below the weekly middle band at 108,010 then that will ruin the short term reversal (back up) setup and firmly fix the next target in the 99k to 100k area.

If Bitcoin returns to a retest of the all time high instead, that will likely ruin the double top setups on Ethereum and Solana and clear the way for continuation higher.

I posted the following note at the end of my post on 13th Jan:

My preferred scenario here is that we see a bullish consolidation either now or soon on Crypto that takes a few months and sets up the next big leg up on Crypto into a possible bull market high in late 2025.

I still like this scenario for a possible overall bull market high on Crypto on or around the end of this year but, as I mentioned at the start, we have currently seen little evidence that Crypto can sustain a bullish move while equities are in a strong downtrend. I’m not seeing any strong evidence yet that the current inflection point on equity indices is the start of a strong downtrend but, if it should evolve into that, Crypto would likely be dragged down with it.

Since I started doing daily videos on Crypto early last year I’ve got Crypto direction right most of the time and more so than any other analyst anywhere that I’m aware of. I’m a very good analyst and all three of these instruments are very classical chartist friendly. I’m not much of a marketer though, and the free Crypto substack I set up last August still has less than 200 readers. I’d like to increase that readership and invite any suggestions on how I could do that.

I am thinking about setting up a second YouTube Crypto channel and recording videos giving likely market direction without requiring the viewers to have some knowlege of technical analysis to understand the videos. Comments on that and other suggestions very welcome.

If you’d like to see more of these posts and the other Crypto videos and information I post, please subscribe for free to my Crypto substack. I also do a premarket video every day on Crypto at 9.05am EST. If you’d like to see those I post the links every morning on my twitter, and the videos are posted shortly afterwards on my Youtube channel.

Crypto Holding Key Support Levels So Far

Back in my post on 11th April I called the likely start of a strong rally which we then saw.

Back in my post on 12th May I called for new all time highs on Bitcoin (BTCUSD) and laid out possible IHS scenarios on both Solana (SOLUSD) and Ethereum (ETHUSD), looking for ideal right shoulder lows on Solana in the 125.43 area and on Ethereum in the 2074.27 area. That hasn’t gone quite as I drew then but essentially both are still running that scenario, though Ethereum has now reached the IHS target.

Back in my post on 23rd June I called the likely lows on those right shoulders made on Solana at 126.09 and on Ethereum at 2113.65, and was looking for that IHS scenario on both to start to play out.

Back in my post on 18th July I was looking at the IHS that had since broken up on Ethereum and the progress made towards the IHS neckline on Solana.

In my post on 22nd July I was looking for some retracement after the IHS on Solana had broken up, and looking also at the possibility that a setup for a hard fail might form in that retracement.

In my post on 4th Aug I was looking at that retracement on Solana and looking for higher highs soon which we saw. I was expecting Ethereum to reach the IHS target at 4109.05 which we saw.

In my last post on 19th August I was looking at a likely retracement starting on both equities and Crypto and we’ve seen that. There is now a clear inflection point here where Crypto could rally back into retests of the recent highs, or break down further into the next targets.

Looking at the Bitcoin daily chart the first short term support levels for the uptrend were the daily middle band, currently at 116,487, and the 50dma, currently at 116,161. Both of those have been broken, opening up a possible test of the next big level which is the 200dma, currently at 100,604.

BTCUSD daily chart:

On the hourly chart Bitcoin is now testing the double top support at 111.8k that I was looking at on Tuesday. A sustained break below this double top support would look for a target in the 99k to 100k area, just below the 200dma, and just above the June low and possible larger H&S neckline in the 98.3k area.

BTCUSD 60min chart:

On the Solana daily chart the key short term uptrend was and is at the daily middle band, currently at 180.69. That has been tested thoroughly this week and is holding so far.

On a further break down the 50dma is just below at 175, but on a sustained break below that the important support levels would be the 200dma, currently at 157.33, and rising support from the April low, currently in the 150 area.

SOLUSD daily chart:

An oversized H&S has been forming on Solana. I haven’t drawn it in as in my view it is too oversized to be valid, but if it was valid the target would be at a retest of the early August low at 155.81.

As I mentioned in my last post that level is important as there is a clear possible double top setup here on Solana, and on a sustained break below the 155.81 low the double top target range would be 101-4.

I’m really not expecting this to make target unless both equities and Crypto are making a major high here, but I am thinking that we might see a break below 155.81, setting up a rejection back up into a retest of the 209/89 high.

SOLUSD 60min chart:

On Ethereum I was looking at the very obvious target and big support at a test of the daily middle band, currently at 4182.53, supported by the backtests of the March and December 2024 highs at 4092.73 and 4109.05 respectively.

We have seen that backtest with a low this week at 4062.26 and so far this big support area is holding.

ETHUSD daily chart:

On the Ethereum hourly chart I mentioned in my last post a small H&S might be forming, and that completed and broke down with a target in the 3600 area. I am expecting one of two things to happen next.

On the bear side Ethereum could head down to that target, also a test of the 50dma, currently at 3661.54.

On the bull side Ethereum breaks back over the H&S right shoulder high at 4389.57, invalidating the H&S and setting the obvious next target at a retest of the 2025 high at 4792. That is a decision that we should see made today.

ETHUSD 60min chart:

Obviously there is a huge elephant in today’s trading room and that is the Fed at Jackson Hole. There is a lot of optimism about the prospect for rate cuts over coming months but after last week’s bad inflation numbers I am doubtful about that. As a result I am leaning towards a downward resolution from this inflection point but we‘ll see. Everyone have a great weekend :-)

I posted the following note at the end of my post on 13th Jan:

My preferred scenario here is that we see a bullish consolidation either now or soon on Crypto that takes a few months and sets up the next big leg up on Crypto into a possible bull market high in late 2025.

I still like this scenario for a possible overall bull market high on Crypto on or around the end of this year but, as I mentioned at the start, we have currently seen little evidence that Crypto can sustain a bullish move while equities are in a strong downtrend. I’m not seeing any strong evidence yet that the current inflection point on equity indices is the start of a strong downtrend but, if it should evolve into that, Crypto would likely be dragged down with it.

Since I started doing daily videos on Crypto early last year I’ve got Crypto direction right most of the time and more so than any other analyst anywhere that I’m aware of. I’m a very good analyst and all three of these instruments are very classical chartist friendly. I’m not much of a marketer though, and the free Crypto substack I set up last August still has less than 200 readers. I’d like to increase that readership and invite any suggestions on how I could do that.

I am thinking about setting up a second YouTube Crypto channel and recording videos giving likely market direction without requiring the viewers to have some knowlege of technical analysis to understand the videos. Comments on that and other suggestions very welcome.

If you’d like to see more of these posts and the other Crypto videos and information I post, please subscribe for free to my Crypto substack. I also do a premarket video every day on Crypto at 9.05am EST. If you’d like to see those I post the links every morning on my twitter, and the videos are posted shortly afterwards on my Youtube channel.

Backtesting The Daily Middle Bands

In my post on Tuesday 5th August I was looking at the modest breaks back over the daily middle bands on SPX and QQQ on the previous day and noting that conversion of those to support would open possible all time high retests, and hard fails there would strongly support the H&S patterns forming on both.

In my post on Thursday 7th August I was saying the same about the second breaks on SPX and QQQ above those daily middle bands on Wednesday and looking at the three strong resistance trendlines on SPX, QQQ and DIA in the event that SPX and QQQ delivered those all time high retests.

In my post on Wednesday 13th August I added a fourth target trendline on IWM and noted a short term inflection point as we waited to see whether DIA would confirm the break back over the daily middle band on Tuesday. That resolved into a strong break higher on DIA.

In my last post on Monday 18th August I was noting that two of those target trendlines on QQQ and DIA had been perfectly hit and held, that there were high quality rising wedges on SPX and IWM that had already broken down, and said that a period of consolidation or retracement should be starting that might well deliver a strong retracement of the move up from the April low. I also reviewed the possible topping patterns that might deliver that retracement.

On Monday I mentioned possible small bull flag setups forming on NQ and RTY that suggested a high retest early this week and that didn’t happen. What we have seen instead is tech-led weakness that has delivered some tests of the daily middle bands. If we are to see a larger retracement then it is the breaks and conversions of these bands to resistance that opens up further downside.

On QQQ there was a close on the daily middle band, currently at 569.50, on Tuesday and a full day yesterday trading and closing below it. The updated rising wedge from the April low has also broken down. This is a promising start but all four of the daily middle bands on QQQ, SPX, IWM and DIA will need to be broken and converted to resistance to open the path to an overdue strong retracement of the move up from the April low.

QQQ daily chart:

SPX delivered a full test of the daily middle band yesterday, currently at 6381, and spent much of the day below it, recovering back over it late in the day. A promising start but holding so far.

SPX daily chart:

IWM came very close to a test of the daily middle band yesterday, currently at 22.36, and that too is a promising start.

IWM daily chart:

DIA has held up the best of these US indices from the highs so far, and has not yet declined enough to threaten a test of the daily middle band, currently at 444.78.

DIA daily chart:

There is however some reason to think though that a test of the daily middle band on DIA may be coming next. On the hourly chart an RSI 14 sell signal has fixed and a small double top has broken down with a target in the 445 area. If this double top makes target that would deliver the test of the daily middle band on DIA.

DIA 60min chart:

In my last post I said:

What are the odds that all four of these indices are topping out for that overdue decent retracement here? Pretty good in my view, and at minimum a period of consolidation is likely here to create some space between price and these rising resistance trendlines.

I’m very much liking the setup for a decent retracement here and this is a promising start. If this does happen I’m thinking this would likely last four to eight weeks and resolve into another leg up on equities into the end of the year. If we do see that retracement here I’ll be watching to see whether bullish patterns form to support that.

I’m also watching for patterns and divergence suggesting an imminent reversal back up. So far I’m not seeing anything significant.

If you like my analysis and would like to see more, please take a free subscription at my chartingthemarkets substack, where I publish these posts first. I also do a premarket video every day on equity indices, bonds, currencies, energies, precious commodities and other commodities at 8.45am EST, but only for paying subscribers. Other places to find me are my twitter, and my Youtube channel.

Some Backtest Targets on Crypto

Back in my post on 11th April I called the likely start of a strong rally which we then saw.

Back in my post on 12th May I called for new all time highs on Bitcoin (BTCUSD) and laid out possible IHS scenarios on both Solana (SOLUSD) and Ethereum (ETHUSD), looking for ideal right shoulder lows on Solana in the 125.43 area and on Ethereum in the 2074.27 area. That hasn’t gone quite as I drew then but essentially both are still running that scenario.

Back in my post on 23rd June I called the likely lows on those right shoulders made on Solana at 126.09 and on Ethereum at 2113.65, and was looking for that IHS scenario on both to start to play out.

Back in my post on 18th July I was looking at the IHS that had since broken up on Ethereum and the progress made towards the IHS neckline on Solana.

In my post on 22nd July I was looking for some retracement after the IHS on Solana had broken up, and looking also at the possibility that a setup for a hard fail might form in that retracement.

In my last post on 4th Aug I was looking at that retracement on Solana and looking for higher highs soon which we saw. I was expecting Ethereum to reach the IHS target at 4109.05 which we saw.

So what now? At some point I expect that equities and Crypto will stop being so strongly positively correlated but there’s little evidence of that having happened yet, so there is an inflection point here where both equities and Crypto could well see a significant retracement. Equities look like they are topping out for that retracement here but on Crypto there is some evidence that may have already started.

Looking at the Bitcoin daily chart the key short term support levels for the uptrend are the daily middle band, currently at 116,752, and the 50dma, currently at 115,920. At the time of writing both of those have been broken, opening up a possible test of the next big level which is the 200dma, currently at 100,421.

BTCUSD daily chart:

Looking at the hourly chart Bitcoin has broken rising wedge support from the April low and a double top has formed but has not yet broken down. A sustained break below double top support at 111.9k would look for a target in the 99k to 100k area.

The 98k to 100k level on Bitcoin is important, just under the 200dma and with the June low and a possible H&S neckline at 98.3k. This would be a very attractive target area.

BTCUSD 60min chart:

Looking at the Solana daily chart the key short term uptrend support is at the daily middle band, currently at 178.26 and that has been tested in the last day and has held so far.

There is no small possible topping pattern on Solana here and on a break below the daily middle band I’d be watching the 50dma and 200dma, currently at 173.20 and 157.86 respectively, and the rising support trendlines from the April and June lows, currently in the 167 and 149 areas respectively.

SOLUSD daily chart:

I would mention though that there is a possible larger topping pattern on Solana here but it isn’t one I would expect to deliver unless this bull market on Crypto is ending unexpectedly early. On a sustained break below the July low at 155.81 the double top range would be 101-4. I’m really not expecting this to be an issue but I’ll be keeping an eye on it.

SOLUSD 60min chart:

Ethereum reached the IHS target at 4109.05, then the extended target at 4290, and came close to retesting the 2021 all time high at 4865.94. That looks like unfinished business above, and after the current retracement I’m expecting to see a new all time high.

Ethereum has led this latest move up on Crypto and the key support level is at the daily middle band, currently at 4081, supported by the two big 2024 highs at 4092.73 and 4109.05. The 4100 area is the very obvious target for a backtest here and should have a decent chance of holding. On a break below I’d be watching the 50dma, currently at 3561.

ETHUSD daily chart:

There’s no obvious topping pattern on Ethereum here though there is a possible H&S setup forming that might then look for the 3600 area. There is also a rising support trendline in the 3900 area but not of high quality so I wouldn’t be surprised to see that broken.

ETHUSD 60min chart:

I posted the following note at the end of my post on 13th Jan:

My preferred scenario here is that we see a bullish consolidation either now or soon on Crypto that takes a few months and sets up the next big leg up on Crypto into a possible bull market high in late 2025.

I still like this scenario for a possible overall bull market high on Crypto on or around the end of this year but, as I mentioned at the start, we have currently seen little evidence that Crypto can sustain a bullish move while equities are in a strong downtrend. I’m not seeing any strong evidence yet that the current inflection point on equity indices is the start of a strong downtrend but, if it should evolve into that, Crypto would likely be dragged down with it.

Since I started doing daily videos on Crypto early last year I’ve got Crypto direction right most of the time and more so than any other analyst anywhere that I’m aware of. I’m a very good analyst and all three of these instruments are very classical chartist friendly. I’m not much of a marketer though, and the free Crypto substack I set up last August still has less than 200 readers. I’d like to increase that readership and invite any suggestions on how I could do that.

I am thinking about setting up a second YouTube Crypto channel and recording videos giving likely market direction without requiring the viewers to have some knowlege of technical analysis to understand the videos. Comments on that and other suggestions very welcome.

If you’d like to see more of these posts and the other Crypto videos and information I post, please subscribe for free to my Crypto substack. I also do a premarket video every day on Crypto at 9.05am EST. If you’d like to see those I post the links every morning on my twitter, and the videos are posted shortly afterwards on my Youtube channel.

I'm also to be found at Arion Partners, though as a student rather than as a teacher. I've been charting Crypto for some years now, but am learning to trade and invest in them directly, and Arion Partners are my guide around a space that might reasonably be compared to the Wild West in one of their rougher years.

Two Perfect Resistance Trendline Hits

In my post on Tuesday 5th August I was looking at the modest breaks back over the daily middle bands on SPX and QQQ on the previous day and noting that conversion of those to support would open possible all time high retests, and hard fails there would strongly support the H&S patterns forming on both.

In my post on Thursday 7th August I was saying the same about the second breaks on SPX and QQQ above those daily middle bands on Wednesday and looking at the three strong resistance trendlines on SPX, QQQ and DIA in the event that SPX and QQQ delivered those all time high retests.

In my post on Wednesday 13th August I added a fourth target trendline on IWM and noted a short term inflection point as we waited to see whether DIA would confirm the break back over the daily middle band on Tuesday. That resolved into a strong break higher on DIA.

By the weekend two out of four of my target trendlines on US equity indices had been hit perfectly on QQQ & DIA and held as resistance, with near misses on the SPX and IWM so far.

Every so often I get a comment from someone that market moves are random and, if that was the case, it would be remarkable if one of those trendlines got a perfect hit and reversal. The odds of that happening twice in the same week would be very low indeed. That is the power of a really well drawn trendline, which is to identify the underlying structure that was already there.

So what now? Well that these two trendlines were hit and respected confirms that they are the correct resistance trendlines from the April low, They match support trendlines that confirm two rising wedges that will likely in due course break down and deliver either a retracement and continuation higher, or a full reversal back into the April low.

In the short term, just under those resistance trendlines, it means that US indices will likely see a period of consolidation or retracement here until those trendlines go higher and create room for US indices to go higher too.

Can those trendlines break? Any trendlines can break, but if we see that here that would likely be a bearish overthrow signalling a decent retracement in this area. The lower probability scenario would be a hard break up, though that does happen and for anyone interested I showed a good example of that that I called in 2021 on SPX in my The Bigger Picture video yesterday.

Looking at the SPX hourly chart the target trendline was almost reached and might yet still be reached this week. I haven’t yet drawn in the support trendline going through the August low as unbroken, but there is still of course a high quality falling wedge there that has already broken down.

At some point I would expect this to break down into a minimum 38.2%, and ideally 50%, retracement of the move up from the April low and that retracement is definitely overdue. We may well be topping out for that here. In this case the obvious topping pattern would be an asymmetric double top or part-formed H&S with pattern support at 6212.69 and a full target in the 5900 area, close to the 38.2% fib retracement level at 5852.

SPX 60min chart:

Looking at the IWM hourly chart the target trendline was almost reached and might yet still be reached this week. I haven’t yet drawn in the support trendline going through the August low as unbroken, but there is still of course a high quality falling wedge there that has already broken down.

At some point I would expect this to break down into a minimum 38.2%, and ideally 50%, retracement of the move up from the April low and that retracement is definitely overdue. We may well be topping out for that here. In this case the obvious topping pattern would also be an asymmetric double top or part-formed H&S with pattern support at 212.34 and a target range in the 193-8 area, close to the 61.8% fib retracement level at 194.26.

IWM 60min chart:

Looking at the QQQ hourly chart the target trendline was hit perfectly so I have now drawn in the rising wedge support trendline going through the August low as unbroken.

At some point I would expect this to break down into a minimum 38.2%, and ideally 50%, retracement of the move up from the April low and that retracement is definitely overdue. We may well be topping out for that here. In this case the obvious topping pattern would also be a part-formed H&S with the neckline at 551.68 and a target in the 520 area, close to the 38.2% fib retracement level at 514.

QQQ 60min chart:

Looking at the DIA hourly chart the target trendline was hit perfectly so I have now drawn in the rising wedge support trendline going through the August low as unbroken.

At some point I would expect this to break down into a minimum 38.2%, and ideally 50%, retracement of the move up from the April low and that retracement is definitely overdue. We may well be topping out for that here. In this case the obvious topping pattern would also be a double top with support at 433.14 and a target range in the 413.50 to 416 area, under the 38.2% fib retracement level at 419.50.

DIA 60min chart:

So what next? Well I’m seeing decent looking short term bull flag setups on NQ and RTY here and I’m thinking that the current highs may well get a retest early this week. If we see that then we could get some good quality possible daily RSI 5 sell signals brewing on SPX, QQQ and IWM, and a possible lower quality one on DIA. If we are going to see a decent retracement start in this area that would strengthen the setup.

SPX daily chart:

What are the odds that all four of these indices are topping out for that overdue decent retracement here? Pretty good in my view, and at minimum a period of consolidation is likely here to create some space between price and these rising resistance trendlines.

I said back in April that it takes a few months for bad economic numbers to feed through and in the last few days we have seen those start to feed through on both jobs and inflation. We may still not be ready for those retracements yet but this is a very nice looking setup.

I am still thinking that a big high on this uptrend may not be seen before the end of this year.

If you like my analysis and would like to see more, please take a free subscription at my chartingthemarkets substack, where I publish these posts first. I also do a premarket video every day on equity indices, bonds, currencies, energies, precious commodities and other commodities at 8.45am EST, but only for paying subscribers. Other places to find me are my twitter, and my Youtube channel.

Watching The Wedges

In my post on Tuesday 5th August I was looking at the modest breaks back over the daily middle bands on SPX and QQQ on the previous day and noting that conversion of those to support would open possible all time high retests, and hard fails there would strongly support the H&S patterns forming on both.

In my post on Thursday 7th August I was saying the same about the second breaks on SPX and QQQ above those daily middle bands on Wednesday and looking at the three strong resistance trendlines on SPX, QQQ and DIA in the event that SPX and QQQ delivered those all time high retests.

In my last post yesterday I was updating the situation with the trendline resistance levels on US indices and noting a short term inflection point as we waited to see whether DIA would confirm the break back over the daily middle band on Tuesday. That has now resolved into a strong break higher on DIA.

Since yesterday morning two of my (now four including IWM) resistance trendlines have now been hit. The first of those is on QQQ where there was a perfect hit of the trendline at yesterday’s high. This confirms the expansion of the original rising wedge and the trendline starting at the April low and running through the early August low is now wedge support.

If we are going to see a high form here for either a retracement or a hard reversal then that resistance trendline may well break in a bearish overthrow and I think that would likely happen here. I’d be looking for negative divergence to form on the RSI 14.

QQQ 60min chart:

The second of those is on IWM, on a major tear the last two days, and where there was a perfect hit of the trendline at yesterday’s high. This confirms the expansion of the original rising wedge and the trendline starting at the April low and running through the early August low is now wedge support.

If we are going to see a high form here for either a retracement or a hard reversal then that resistance trendline may well break in a bearish overthrow and I think that would likely happen here. I’d be looking for negative divergence to form on the RSI 14.

IWM 60min chart:

SPX hasn’t quite made it to the resistance trendline yet but that is now in the 6500-5 area and there are decent odds that will be hit in coming days. A retest of yesterday’s high would set possible hourly RSI 14 and RSI 5 sell signals brewing.

SPX 60min chart:

DIA had a very strong day yesterday and is now also in range of hitting the resistance trendline there. That is now in the 452 area and I’m expecting to see at least a retest of the July all time high at 450.25 in coming days. Possible hourly RSI 14 and RSI 5 sell signals are already brewing.

DIA 60min chart:

The last chart today is the IWM daily chart, which is currently interesting for two reasons. I posted this chart in my post on Sunday 3rd August proposing a rally from the Friday 1st August low after the bad jobs numbers. The point I was making was that the close below the daily 3sd lower band seen at that close historically suggested an imminent rally.

The point I’d make today is that IWM touched the 3sd upper band yesterday and that touch is suggesting that at least a short term consolidation or retracement is close.

The second point I would make looking at this chart is that there is still an IHS on this chart that has broken up with a target at a retest of the Dec ‘24 all time high at 243.04, and that this target may be made in coming months if we see a retracement soon and then equity markets go higher.

IWM daily chart:

I’m still thinking that this IHS target may be reached, and I’ve been talking for months about the possibility of this market uptrend running through to the end of the year.

I’ve noted before that bad news takes a while to filter through into the economic numbers, and we’ve been seeing that. With an unqualified political hack now appointed to head the Bureau of Labor Statistics that process may now take even longer. Something to bear in mind.

If you like my analysis and would like to see more, please take a free subscription at my chartingthemarkets substack, where I publish these posts first. I also do a premarket video every day on equity indices, bonds, currencies, energies, precious commodities and other commodities at 8.45am EST, but only for paying subscribers. Other places to find me are my twitter, and my Youtube channel.

Channelling Zaphod Beeblebrox

In my post on Tuesday 5th August I was looking at the modest breaks back over the daily middle bands on SPX and QQQ on Monday and noting that conversion of those to support would open possible all time high retests, and hard fails there would strongly support the H&S patterns forming on both.

In my last post on Thursday 7th August I was saying the same about the second breaks on SPX and QQQ above those daily middle bands on Wednesday and looking at the three strong resistance trendlines on SPX, QQQ and DIA in the event that SPX and QQQ delivered those all time high retests.

Yesterday the headline inflation number remained moderate, though the core CPI number edged back up over 3%, but overall this was interpreted as bullish and we have now seen those all time high retests on both SPX and QQQ. IWM delivered a very strong break above the daily middle band yesterday into a full retest of the July high and DIA, though lagging badly behind, managed a slight break back over the daily middle band, closing at 444.68 against the daily middle band’s close at 443.66.

Short term this puts US equity indices in a short term inflection point as that modest break up on DIA, if it is going to fail, would most likely fail today or perhaps tomorrow. At the same time there are currently decent looking double top setups on all of SPX, QQQ and IWM.

On the DIA daily chart a second confirming daily close above the middle band is needed and, if DIA is going to head significantly higher, a decent move up from the middle band in the near future.

DIA daily chart:

If we are going to see US equity indices head higher from here then I will be watching the three high quality resistance trendlines that I was looking at in my last post, though the one on DIA isn’t currently in much danger of being hit.

Of the other two, SPX has a decent quality possible double top setup currently but may be heading to that resistance trendline in an expansion of the rising wedge from the early April low. That trendline is currently in the 6490-6500 area and is rising about 5 handles per day.

SPX 60min chart:

QQQ also has a decent quality possible double top setup currently but may be heading to the resistance trendline there in an expansion of the rising wedge from the early April low. That trendline is currently in the 583 area and is rising about 0.7 handles per day.

If these two resistance trendlines are reached, and a short term high is forming there, both of those trendlines might overthrow bearishly at the high of course.

QQQ 60min chart:

There’s no obvious reason yet to expect the resistance trendline on DIA to be tested in the near future, but if the July high is tested, then it would not be far above. That trendline is currently in the 452 area and is rising about 0.09 handles per day.

DIA 60min chart:

IWM rose hard yesterday on the expectation that interest rates might be going down soon as the smaller caps are more sensitive to interest rates.

I have a decent looking trendline there too, albeit not quite as high quality as the other three, and that is currently in the 231.5 area & rising about 0.33 handles per day.

IWM 60min chart:

I would note though that while there has been for decades a polite fiction that the Fed controls interest rates, that isn’t actually true. Lending rates are based on the ten and thirty year treasury yields (TNX & TYX) and those are set directly by the bond markets. Both have traded sideways since the April low on equities. The Fed cut the discount rate by 1% from September to December 2024 and since that started the ten year treasury yield (TNX) has risen 0.6%, and the thirty year treasury yield (TYX) has risen 1%. If the Fed cuts rates now that may again have no impact on actual interest rates.

There is also an increasing danger to both equity and bond markets from the Trump Administration. There have been for decades two strong, independent and internationally trusted institutions in the US delivering economic numbers and they are the Federal Reserve, and the Bureau of Labor Statistics (BLS). Last week Trump fired the BLS chief and appointed an inexperienced political hack in her place. Jerome Powell at the Fed looks secure for now but that is in part because his term in office ends in May 2026. When he goes it seems very possible that another political hack may be appointed in his place.

I don’t know how many of you have read Douglas Adams and his wonderful Hitchhiker’s Guide series but the Galactic President in that series, Zaphod Beeblebrox, had a pair of Peril Sensitive Sunglasses that in the event of any trouble turned completely black, thus preventing Zaphod from ever seeing anything that might alarm him. It seems that Donald Trump may be doing something similar at the BLS and planning more of the same at the Fed. If so that will reduce the transparency and trustworthiness of US economic numbers and the confidence of foreign governments and investors, who own close to a quarter of both the US equity markets and the US national Debt.

Obviously that could end very badly, and Trump’s dream of having an obedient Fed chair that cuts interest rates back down to 1%, might well instead deliver a crisis of confidence that could send actual interest rates in the US far higher.

If you like my analysis and would like to see more, please take a free subscription at my chartingthemarkets substack, where I publish these posts first. I also do a premarket video every day on equity indices, bonds, currencies, energies, precious commodities and other commodities at 8.45am EST, but only for paying subscribers. Other places to find me are my twitter, and my Youtube channel.