Testing The Weekly Middle Band

I gave three topping options for SPX yesterday morning. The break below 2110 eliminated the first, but the action yesterday afternoon added another option, so there are still three options this morning, which I'll list in the order of likelihood as I see it.

The first is that SPX is forming a slightly downsloping H&S, and that we should see a bounce with an ideal target in the 2114/5 area this morning before a break down towards a target in the 2065-70 area. The bounce would be a 50% retrace of the falling wedge from the high and would stay under important resistance at the 50 hour MA in the 2117 area.

The second is that the H&S has already formed, albeit with an undersized right shoulder, and has broken down with a target in the 2072 area. I would discard this option on any move over the right shoulder high at 2108.29.

The third, which becomes much more likely on an hourly close over 2119, is for a retest of the highs to make the second high of a double top. There is an obvious risk with this option that there is a bullish breakout, though a marginal new high or even all time high wouldn't damage the bear case in my view.

Whatever happens here the bears have a strong statistical edge to go lower on the basis of the triangle that broke up last week. As I said at the time, after the thrust up from the triangle was complete, there was an is a 90% chance of a full retrace of that thrust. There are two possible ways to draw the triangle that would give targets in either the 2083 (Stan's preference I think) or 2067 (my preference) areas, but either way that retracement has not yet made target. SPX 15min chart:

If options 1 or 2 play out then we could see a decent move down today. That would fit with stats for Fridays of late, with six of the last eight closing red, though the two that closed green were in the last two weeks, and given that the lows yesterday were testing the weekly middle band, it opens up the real possibility that the fairly bullish breakout weekly candle last week breaking back over the weekly middle band may be negated by a very bearish weekly candle this week breaking back below it. I'll be watching the close with great interest today. SPX weekly chart:

Stan and I will be doing our first interactive 'Chart Chat' webinar for followers at theartofchart.net on Sunday. This will be open to all for the first few weeks and you can watch Stan & I updating our projections for equities, bonds, oil & gas, USD, precious metals and other tradable instruments for the coming weeks there. It should last about an hour and anyone who trades any of these instruments and/or enjoys high level TA should come and watch. We have been doing these webinars since last October exclusively for members at Princeton Trader and, false modesty aside, have made a lot of excellent calls and quite a few amazing calls over the period. You can see Stan's post about the webinar and a short video showing some of those calls here. Everyone have a great weekend :-)