Definitely Maybe

Stan and I were looking carefully at the current setup on SPX in yesterday's chart chat and you can see the recording of that here. Short term SPX and the rest of my optic run indices are still in the same inflection point that they were in on Friday morning, waiting for a break either way.

If that break is upwards then the very obvious target is the 2030 area, at the retest of broken channel support, the target for the retrace of the triangle from two weeks ago, and not far below the SPX double bottom target at 2041.

If this breaks down instead the first sign will be the break below Friday's intraday low at 1975.19. That was retested on Friday and, if not broken today, should be a floor while this rally continues. Next support would be short term double top support at 1948.33, and a break below that would fix a double top target in the 1903 area. That would need to be confirmed by a break of 1940.51, which would fill Thursday morning's unfilled breakaway gap. If we were to see a daily closing break below the 5 day MA, then on my 5DMA stats I would expect to see a retest of the 1867.01 low with most likely a break below that. I have no fails yet on this 5DMA stat since the start of 2007, so that would be very high probability. SPX daily 5DMA chart:

In terms of the pattern structure here none of my optic run indices can hold a support trendline yet and two of them, SPX and TRAN, have formed decent patterns that have broken down and retested. We may well see those pattern follow through to the downside. Scan 3x 15min SPX INDU TRAN charts:

Scan 3x 15min NDX RUT NYA charts:

When a double bottom fails there will generally be a double top that has formed and plays out to kill the double bottom. There are clear short term double top setups on all of my optic run indices and we'll have to see which way SPX breaks today. I have a slight bearish lean but this could very much go either way. The stats for today are neutral and the stats for tomorrow lean bullish.

The Badgers Are Still Angry

I remember a trading bud describing the tape in the strong bear move in 2011 as angry badger tape. We've been seeing that again this week and I think we could see yesterday afternoon that the badgers are still angry. If you're trading this intraday then you really might consider taking today off. If you are swing trading then watch the key levels carefully.

What are the key levels today? There is only one really important one today on SPX and that is the open gap from yesterday morning. That was retested and held in the wild move yesterday afternoon. As long as it holds and bulls make new highs today we should at least test 2000. If that support breaks then the bull case here falls apart and I would draw your attention to the nice looking double top setups on SPX, Dow, TRAN ........... Scan 3x 15min SPX INDU TRAN charts:

.......... NDX, RUT and NYA. Bulls are in must perform here. Scan 3x 15min NDX RUT NYA charts:

On the weekly chart there is decent weekly closing support at the 100 week MA, now at 1963, and at the weekly 3SD lower band, now at 1969. The only weekly candle that opened and closed under the 3SD weekly lower band in the history of SPX was in the 1987 crash, so a close below would be impressive, but would not be the only very impressive stat this week. On the upside the double bottom target is at 2041 and broken rising channel support from 2012 is in the 2025-30 area, and may now be strong resistance. SPX weekly chart:

Today could be wild and treacherous, like much of this week, so trade safe. If yesterday morning's gap is filled I would suggest being extremely cautious with longs. While it isn't broken I'd be very cautious with shorts. Stan posted an update last night and you can see that here.

Mind The Gaps

The bears had a try to make a lower low on SPX yesterday and failed into a move up that closed well above the 2SD daily lower band. The bulls have a shot at turning this back up today and on a sustained break over double bottom resistance at 1954.09 the target is the 2041 area. For some reason I called that in the 2050s yesterday but the target would definitely be 2041 area.

I ran the optic run 15min charts yesterday and I'd assess those as being neutral to bullish, with the most bullish chart being RUT. If RUT is leading then bears are in real trouble here. Scan 3x 15min SPX INDU TRAN charts:

Scan 3x 15min NDX RUT NYA charts:

Bulls are opening with a breakaway gap over resistance today and the setup is simple enough. If bears can fill today's opening gap then it is no longer a breakaway gap and we would generally see a hard fail. On the upside there are a load of open gaps marked on the chart and filling those gaps is bullish. At a hit of 1975 SPX I will be taking the double bottom target at 2041 as the most likely next target.

Lower Band Bungee Jumping

Yesterday was a classic lower band ride day with a touch of the 2SD daily lower band, an AM high that failed, and a gap fill and lower low. The obvious target is still the 1820 area and as long as the lower band ride continues then I think we may well make that target today. SPX closed back within the 3SD lower band yesterday, so SPX just missed a record breaking three consecutive closes below that.

For today I'd be looking for an AM high that would ideally test the daily 2SD lower band which closed yesterday at 1927. Any high under Monday's high at 1954.09 is theoretically acceptable but I'd be getting edgy about the short case on a break over yesterday's high at 1948.04, and would recommend being very careful with shorts on any break over 1954.09, as that is possible double bottom resistance. SPX daily chart:

In terms of the pattern setup here the bear flag that I was talking about yesterday morning turned out to be a bear pennant that broke down in the afternoon. I would normally look for either a retest of the low on a break like this, already done at the close last night, or or on a break lower the same length move as the flagpole into the pennant, which in this case would be 1720. I'm expecting to see support in the 1820 area, but if there is a strong break below then 1720 could well be the target. SPX 60min chart:

Just for clarification, when I post a possible bull or bear scenario on a break over a level, it does not mean I am giving that scenario equal weight. I'm leaning strongly bearish here unless we see a break over 1948.04, neutral on a break over 1948.04 but under 1954.09, and bullish as long as bulls can keep the tape over 1954.09. The bears have the advantage here and a decent chance of making the 1820 target area today. If we see that target made intraday we could see a strong rally off that test. Stan thinks a V day is very possible today.

Step Aside 1987 Crash and Lehman Brothers

That was an amazing day yesterday, and the close near the (SPX) lows delivered a second straight daily close well under the 3SD daily lower band, a feat not equalled in the 1987 crash, the 1994 bonds crash, the 1997 Asian Crisis, the 1998 Russian Crisis and collapse of LCTM, the 2000 Tech Crash or the Lehman Brothers in 2008. Why? Not sure yet though Shanghai falling to a level last seen six months ago doesn't seem like a great reason.

Hat tip to my option trader friend Yousuf Hamid here for his prediction to me at the weekend that the next move would be a hard and fast fall to 1820. Nice call mate.

SPX broke far below the 61.8% fib retrace of the rising wedge from the October low at 1820. That makes 1820 the obvious target for the current move and if that is going to be tested I'd expect that today or tomorrow. I would also draw your attention to the huge volume spike yesterday that was the largest in the last year and considerably larger than the spike seen at the October low. A meaningful low should not be more than a day or two away. If we see a lower low I'll be watching the 60min chart for positive divergence. SPX daily chart:

Short term I have two options for an AM high and fail today. The first is possible double bottom resistance in the 1955 area. On a break above I'd be looking for 2053. The double bottom could be a bear flag however. If that formed a bear flag channel I'd be looking for resistance in the 1965-75 area and then a fail into new lows. SPX 60min chart:

It's going to be whippy today. Trade safe. Intraday this is a market for the quick and the dead. If you aren't quick then it may be worth taking the day off.

Just Wow

Well this has certainly been an impressive move. I wrote a post yesterday looking at the stats for daily and weekly 3SD (three standard deviations from 20 period MA) punches, and the last time that a weekly punch through the 3SD lower band like the one we saw on Friday continued down hard was at the collapse of France before the German attack in May 1940. If we close down hard today then this decline will, in this respect, have done what the declines in 2000 (Tech crash), 1998 (Russian crisis and LCTM failure), 1997 (Asian crisis), 1994 (bonds crash), 1987 (no clarification required I hope), and others all failed to manage. You can see that post here.

That said, we are a long way from today's close and on the four equivalent punch closes through the 3SD daily lower band, three of those went lower the next day, with AM declines of 1.8% (equiv to 1934), 2.5% (equiv to 1920) and 3.7% (equiv to 1897). All four closed up with rises ranging between 3.2% and 5%.

However there is a serious implication for an significant RTH break below 1940 here as it is the 61.8% fib retrace of the rising wedge from the October low at 1820. Wherever SPX closes today after that it would open up a test of 1820 as potentially the next big target after the strong rally that is still likely here. I ran my 60min optic run charts this morning and there are already targets near those full wedge retracements on Dow and TRAN,  though the SPX double top only targets the 1954 target that I called on Thursday night. Scan 3x 60min SPX INDU TRAN charts:

I don't have a reversal pattern on NDX here really though I'd note that this hasn't stopped NQ (Nasdaq Futures) hitting limit down in overnight trading. I have an open H&S target on RUT into the 1120 area and NYA, as with Dow and TRAN) has a pattern target now far above the October low. Scan 3x 60min NDX RUT NYA charts:

With the open in 30 minutes it seems very likely that ES will break the 61.8% fib level at 1940 at the open. That has bearish implications but doesn't invalidate the very bullish historical stats for today and this week. Only the closes can do that so we'll see whether there will be a ripper rally or not today that will close SPX in the green. If not then perhaps the rumors of Hitler's death have been exaggerated :-)

A couple of things to add at the end here. I say them regularly but people really need to remember them. TA and historical stats can tell you what is likely to happen but they can never tell you what will happen. The market doesn't take orders from anyone and will do what it will. However accurate any analyst's forecast might be, they are never based on paranormal powers of precognition. They are based on historic data and these forecasts only ever deal in probabilities, never certainties. The stats for a green close today are VERY strong. Does that mean that SPX needs to close up? No. It means that if it closes down then next time we see 3SD punch closes the stats will be less bullish.

Everyone loves certainty, but there's no such thing in the markets, and not much anywhere else. That's just the way the world works.

We did a Chart Chat yesterday afternoon and you can see the link to that here. As I write ES has just gone limit down at 100 handles below the close on Friday. We'll see whether SPX can scrape itself off that floor today.

Murder by Numbers

The bears took our preferred triangle breaking up to new highs scenario yesterday and beat it to death with sledgehammers. 2134 is now likely to remain the 2015 high and SPX has further downside targets that I'd expect to see made in coming days.

The triangle has broken down with a target in the 2015 area, close to the 38.2% fib retrace of the rising wedge from the October low, but the main target in my view is the larger double top target at 1954 (slightly above the 61.8% retrace) that fixed on yesterday's extended and dramatic break of double-top support at 2044. The SPX daily chart:

On the short term chart the pattern from Wednesday's intraday high is either a falling wedge or channel. Preferred option is wedge but if we see early weakness today (ES trading 18 handles under the RTH close as I write), then the low should confirm which pattern this is. When it breaks up, which I'm expecting today, but in this angry tape it may not, then I'd be looking for a short term reversal pattern and a strong rally from there, into at least the daily lower band. SPX 5min chart:

SPX is on a daily lower band ride here, and I'd expect to see at least a touch of the daily lower band today. That closed yesterday at 2054 and may close as low as 2040 today. I'll be doing a bigger picture post looking at the weekly and monthly charts on theartofchart.net later, and will post the link on twitter. For now though I'd note that the weekly lower band is at 2054, and if a rally in the afternoon comes close to that it could be a magnet for the close.

Bottom Lines

A bad day for the bulls yesterday with 2080 support lost hard twice during the day and a close well under triangle support. Advantage bears for the moment, and they could get a run down to test range and double top support at 2044.

I've been having a careful look at the SPX pattern structure and I have a possible falling wedge from 2132 forming here. This is mirrored by a triangle on the RSI 14 and if we see an hourly close below that this morning then that would open up a test of wedge support, currently in the 2046 area, just above the key 2044 support level. SPX 60min chart:

The must hold hold level for bulls here is 2044.02. Any print below damages the bull case and a sustained break below should kill it, opening up the double top target at 1954. SPX daily chart:

Bulls are on must perform today. If they can hold 2044.02 then they still have a decent shot. If they lose that support level then I'd expect to see 1950s soon. Meantime Stan and I are both still leaning long here.

Dotted Arrows

Yesterday went very well for bulls on the surface, with a retest of the daily middle band and broken triangle resistance that held very well and closed above both. On the shorter term charts though a rising wedge from 2052 confirmed the wedge support trendline, and then broke down and retested in the afternoon. These patterns break down 69% of the time and after a break like this, assuming it didn't then break up (31% option), then I'd be looking for a double top or H&S to form then either a 38.2% to 61.8% fib retrace (continuation wedge option) or a full retracement of the wedge (reversal wedge option).

I posted the double top option on twitter last night. On this scenario I'd be looking for a retest of yesterday's high, and then a retracement to the 38.2% fib retrace in the 2084 area. SPX 5min chart (DT scenario):

ES has broken below 90 overnight however, so I think we are going with the H&S option, with a target in the same area as the double top option. There is strong support in the 2080-5 area and I'm expecting that to hold. If it breaks hard then SPX may potentially retrace all the way back to 2052. SPX 5min chart (HS Scenario)

On the daily chart I would very much like to see a close today at 2091/2 or better to avoid breaks of the 5 DMA and daily middle band. As long as 2080-5 holds and we see the close at 2090/1 or better then the current uptrend should just continue from there. A closing break below 2090 wouldn't mandate more downside, but it wouldn't be a good sign. SPX daily chart:

What Stan and I are looking for over the next few days is for support in the 2080-5 area to hold, then a move to the 2122 area where there is a big inflection point. I'm leaning long at that inflection point into the 2165-95 area, ad Stan is leaning short for a reversal back into 2040-50 range support. Which way will this go? Well the pattern structure should be clearer by then and should give us some clues. We'll be posting updates on the way.  Stan has posted an update video this morning and you can see that here.

Back on the 5DMA Three Day Rule

Yesterday's little double top failed at the 38.2% fib retrace and we saw the move up afterwards that I was looking for. In a move that was really impressively bullish SPX then powered through the 50 DMA, 50 DEMA, daily mid band, 100 DMA and triangle resistance, closing above all of them. Unless we see a reversal candle today I am working on the assumption that the triangle is now breaking up towards the 2165-95 target area, though in terms of the expected path I'd like to see a short term high in the 2110-20 area, then a retest of triangle resistance, daily mid band and the 50 hour MA in the 2090-5 area, then the main move up towards the 2165-95 target area.

As the 5 DMA has been broken again, SPX is on day three of the 5 DMA three day rule. the 5 DMA must hold as closing support today to avoid a likely retest of the 2052 low. I'm not expecting to see that though. . SPX daily 5 DMA chart:

For intraday support I'd like to see the daily mid band at 2095 hold as support and would be getting seriously concerned about a break back down on a break below the 50 hour MA at 2085. SPX daily chart:

I'm definitely leaning bullish today. I'm looking for an AM low to buy ideally and then a continuation of yesterday's move up.

Short Term Crossroads

SPX is at a short term crossroads today, as Stan and I were discussing in Chart Chat yesterday. You can see the recording for that here. The option I outlined was a double top that would target the 2068 area on a break under 2080. That would be just above the 61.85 fib retrace of the move up from 2052. Stan was looking at a possible break up through triangle resistance into the 2120 area. We agreed it was a coin toss but so far SPX seems to be favoring the double top and retrace scenario. SPX 5min chart:

If we see a test of resistance later today I have the resistance cluster that I was looking at on Friday morning in the 2094-7 area and triangle resistance in the 2100 area. SPX daily chart;

I'm thinking AM low and then rally today, unless bears can break below 2067, in which case we might get a retest of the 2052 low.

Looking for Support

Things have been developing fairly well for the (short term) bull scenario into a final new all time high before a much larger retracement. Triangle support has been pinocchioed four times in the last five days, and held at each daily close, though it took an amazing 30 handle rally on Wednesday afternoon to manage it that day. Bulls need to establish some intraday support below and then go up to break resistance.

That resistance is a strong cluster in the 2094-2102 area composed of the 50 DMA at 2094, the 50 DEMA at 2095, the 100 DMA at 2097, the daily mid band at 2098, and finally triangle resistance in the 2101/2 area. The high yesterday was at 2093, so that was a first pass fail. Bulls need to find some support today and then try again. SPX daily chart:

Where should that support be found? Well the move up on Wednesday formed a rising wedge that broke down and then evolved into a rising megaphone. That megaphone broke down yesterday afternoon and a decent looking H&S has formed that would target the 2070 area on a break under 2080. The obvious retracement range runs from the 38.2% fib retrace at 2077 to the 61.8% fib retrace at 2067. Bulls need to find support in this area today or run a very serious risk of retesting Wednesday's intraday low. SPX 5min chart:

The closing setup yesterday was a bear flag and Fridays have been down nine of the last eleven (stat from my friend Cobra), so I'm expecting some weakness in the morning today. I'd be surprised and concerned to see a daily close below 2085 today as that is the triangle support level.

The 5DMA Three Day Rule Plays Out

I was saying on twitter last night after the bulls failed to recover to the 5DMA at the close that the 5DMA three day rule that I posted yesterday morning is a really strong stat. No stat can deliver all the time, but I haven't actually found a fail on this one yet, though I may well find one when I look back further than 2007. At some point this stat will fail but that's not likely to be today. SPX 5DMA chart:

One thing that this retest of Friday's low doesn't mean however is that the triangle on SPX is going to break down. The chances of a break down have increased, and the support trendline on the SPX triangle may well break down today, but there a lot of false breaks on triangles, and this one is still more likely to break up until we see a break of triangle support on a daily closing basis on the RSI triangles. Until that happens Stan and I are assuming that this is a false break before the real break up. Only that RSI break or a break below 2036 invalidates the bull scenario here.  SPX daily chart:

The important support levels here are mainly on the weekly chart, where the weekly bands are now just 3.45% apart, a level of compression only beaten marginally in 1993 and 1994 since 1970. This is very likely to resolve down, and the triangle break up that we are expecting first should just be putting the cherry on top of a very bearish technical cake.

The levels to watch here on the weekly chart are the weekly lower band in the 2062 area, the 50 week MA in the 2059 area, possible double top support at 2044, and if all that support can be broken then primary bull cyclical bull market rising channel support is now in the 2025 area. SPX weekly chart:

Stan is looking for 2040s here and I will be looking for a likely low there. I'll also be watching the RSI triangles carefully and will call any closing break down there on twitter if seen. If this does break down below 2036 then the double top target would be in the 1950 area and I'd expect that to be made. Until that break of 2036 or RSI triangle break however, we are expecting the next decent move to be up.

The 5DMA Three Day Rule

The bulls put in a strong day yesterday and almost tested triangle resistance. The RSI mirror triangles on the daily chart broke up and I would normally now expect to see a thrust up from the triangle to follow the RSI triangle breaks. However SPX has not yet convincingly broken back over the daily middle band, or broken up from the triangle, or broken the last significant high at 2114.24. SPX also needs to establish some support and that is the main issue for today. SPX daily chart:

Where does SPX need to establish support? Well on a closing basis it must hold the 5 day MA in the 2092 area, and ideally close back over the 50 hour MA as well, currently in the 2095 area. The 5DMA is the main one though and I have a rule that I have established after a lot of research on 5DMA breaks.

The (RTH closing basis only) rule is that if SPX breaks back over the 5DMA after a decline of more than 2%, then SPX must close at or over the 5DMA on the following two days to avoid a fast retest of the low just made. That retest will usually result in a lower low and I have found no exceptions to this rule as far back as the start of 2007, which is as far as I have looked.

In effect this means if bulls fail to close SPX over the 5DMA today or tomorrow, then the 2067.91 low will very likely be retested this week, and likely broken at that test. Stan has a possible scenario back into the 2040s if that happens and was talking about that in his post last night. You can see that here: SPX 5DMA chart:

How are my optic run indices looking here? SPX is close to a test of triangle resistance of course, the falling wedge on Dow broke up and has retraced slightly over 38.2%. Bull case has Dow making the right shoulder on an IHS here. Bear case is that the falling wedge is a continuation wedge and is played out. The right shoulder on TRAN that I was talking about yesterday is forming ok. Screen 3x 60min SPX INDU TRAN charts:

NDX is on the way back to falling wedge resistance, which should be the next target. RUT is on the way back to channel resistance, which should be the next target, and NYA has broken slightly over triangle resistance. Screen 3x 60min NDX RUT NYA charts:

Bulls need to hold the 5DMA at the close today. That closed yesterday at 2092 and will most likely close a bit lower today. Intraday I'd be looking for support in the 2087 area and the chances of a bullish resolution for today will be considerably lower if intraday support isn't found there. 

Nobody Expects The Spanish Inquisition

Friday afternoon was very dramatic looking for the low, which overran my target low area by 1.09 handles, and spent a leisurely afternoon building a complex IHS before breaking up towards the end. That was actually a lot of fun in a very primal man vs market kind of a way and a great way to wrap up the week.  My trading bud Mike Vacchi has written a post about that which you can see here. So what now?

Well I posted the chart below after the close on Friday night showing the falling wedge on SPX and the first step today is to see whether SPX can break over falling wedge resistance in the 2081 area. At the time of writing it seems likely that SPX will gap over that so most likely that breaks up at the open or later this morning. What then?

I'd normally expect to see a reversal pattern form, not the IHS at the low on Friday as that isn't proportionate to this wedge, but a larger pattern that would normally be a double bottom or an IHS. There is a very obvious possible IHS neckline in the 2086 area, and while a retest of Friday's lows is starting to look a long way down, I've found in the past that it's best never to underestimate the ability of any tradeable instrument to retest a significant support level, resistance level, or break. It may be that nobody is expecting to see a retest from here, but I've seen similar retests happen a lot, in markets that were looking a lot less two way than this one. I'm not ruling it out here at all, though I prefer the IHS option . SPX 1min chart:

On my 60min optic run charts you can see that all six indices have formed short term (68% bullish) falling wedges, On SPX that is within a large triangle, with what looks so far like a false break down on Friday. triangle resistance is now in the 2107.5 area. On Dow there is a very nicely formed larger degree falling wedge which has now bullishly overthrown .... as long as the next break from the pattern is up. The pattern on TRAN is too large to mark on this chart, but you can see what I'm saying when I say that I have that it a very large, and mostly formed IHS. Screen 3x 60min SPX INDU TRAN chart:

There is a larger degree falling wedge on NDX with a smaller bullish overthrow, a falling channel on RUT with a possible double bottom forming, and a triangle on NYA that has done waves A through E and looks ready to break up at any time. Screen 3x 60min NDX RUT NYA charts:

I was taking a bit of flak last week about Stan and I having a new all time high on SPX as our primary scenario, and it was mentioned that TRAN was in such a mess that such a rally seemed very unlikely. Well I had a careful look and TRAN formed a falling wedge from the highs that has broken up and retested perfectly at the lows on Friday. There is also a large IHS forming that if it breaks up, will target almost a retest of the all time high last November. This may not happen, but as I was saying above, never underestimate the possibility of a retest. As a closing move in this interminable topping process, retests of the high on Dow and TRAN which SPX, NDX and RUT make new all time highs would make a lot of sense. Time will tell as always. TRAN daily chart:

Important resistance levels that I'll be watching today on SPX are the 50 hour MA at 2095, the 50 DMA at 2096, the daily middle band at 2102, and triangle resistance at 2107, though in truth I'm doubtful about seeing a break over 2095/6 resistance today in the absence of a trend up day. .

The link to the video from last nights Chart Chat at theartofchart.net is here.

Pattern Setup Clarifying

The low yesterday confirmed a triangle option that I wasn't looking hard at, but I'd not treated as the main triangle option here. It's big, and when it breaks I'm expecting it to break up. In the meantime Stan's expecting a marginal lower low today and that would be a false break down as long as the equivalent triangles marked on RSI don't break down. Resistance is now at yesterday's broken support in the 2087 area, and Stan is looking for support today in the 2069-73 area, though it could run a little lower. SPX daily chart:

The really interesting pattern to emerge yesterday however was on Dow, where the triangle I showed yesterday morning with the solid three touch resistance trendline has evolved into a perfect falling wedge. These break up 68% of the time and this pattern is strongly supporting my expectation that the SPX triangle will break up. If we see a lower low below the falling wedge today I'll be working on the assumption that would be a bullish underthrow of this falling wedge before it breaks up. Dow 60min chart:

Is there a risk that this all breaks down instead? Definitely. Technical Analysis only weighs the odds of particular outcomes, as no-one can actually discern the future. If we do see a hard break down on SPX below 2040 then I'd be looking for a move to the 1950 area, and both this triangle and the falling wedge would support that move, as by then I'd expect both to have broken down with conviction. Until then this is a bullish setup, with likely support not far under yesterday's low, and a target range on a break up in the 2165-95 area. If we see that move it should be a termination move that leads directly into a much stronger pullback.

Both Fridays and NFP days have leaned bearish in recent months. Everyone have a great weekend. :-)

The Bigger Triangles

The small triangles I was looking at yesterday broke up and then retraced, so they are played out now. That has helped define the larger triangles that I mentioned which are shown below on SPX and Dow. I'm leaning towards a break up from these triangles towards Stan's 2015 high target in the 2165 area, as long as SPX can hold the 2087 (current) floor area. SPX 60min chart:

The Dow triangle is similar to the SPX version except that it has a very nice three touch resistance trendline from the July high at 18137.12. A sustained break above that would most likely signal the expected move to all time highs. INDU 60min chart:

I've been taking a look at the DAX chart in the last few days and on the weekly chart the outlook is extremely bearish. On the daily chart though there is a setup that may well deliver a new all time high within a few days or weeks. That new high would most likely be the second high of a double top. Obviously this scenario would be a very decent fit with the 2165 new all time high then fail that Stan and I are looking for on SPX. DAX daily chart:

It's all about 2087 SPX support today for me. If it holds today then we most likely start a leg up towards Stan's 2165 target. If there is a sustained break below that 2187 support then that opens up lower pattern targets in the 2060 and 2045 areas. If the support holds we could see a V day with a strong afternoon rally.

Triangle Options

Looking at the 60min chart we are seeing it failing to hold as either support or resistance this week. SPX is making lower highs and higher lows. I'm thinking that SPX is forming a large triangle here, and I think that there may well be a smaller triangle formed within that triangle. SPX 60min chart:

In terms of the smaller triangle SPX, NDX, RUT and NYA all gapped over triangle resistance at the open. Dow looks a bit weaker and TRAN has reported that it's still sunny on Planet TRAN. On this opening setup I'd either expect a hard fail after a high made in the first hour today, or move to the triangle target in the 2120 area, followed by a retracement back into the 2095-2100 area and then most likely lower.  Scan 3x 15min SPX INDU TRAN charts:

Scan 3x 15min NDX RUT NYA charts:

I don't have any particularly strong feelings on direction here, apart from a generally bearish bias over the next week or two. If we see SPX break over the 2114.24 high, I wouldn't be looking for a big break. This remains a range bound two way market.

Watching the Russell 2000

That wasn't a particularly satisfactory way to close the week on SPX, with a retracement still likely coming shortly but the action on Friday making a serious mess of the setups I was looking at in the morning.

The clearest charts here are Dow, TRAN and RUT. I'd generally exclude TRAN because it is often at odds with all other indices. Scan 3x 15min SPX INDU TRAN charts:

That leaves Dow and RUT and of those two only RUT is still in a very decent rising pattern from the last lows. It is therefore RUT I'll be watching for the support break on that pattern. When we see that the retracement will most likely have already begun. Scan 3x 15min NDX RUT NYA charts:

I'll add at the end the DAX chart that we were looking at yesterday in Chart Chat. This is a very nice rising channel from the 2009 that suggests strongly that DAX is currently forming the topping pattern to end the move up from that 2009 low. Food for thought. DAX weekly chart:

So what are the prospects for some retracement today? Well the stats on the first day of the month most definitely lean bullish, just as the stats for Friday leaned bearish. I'm therefore a bit doubtful about seeing that today. The rest of the first ten days of August lean bearish so tomorrow would be a better time to start. I also don't have any sell signals on SPX here and would need to see Friday's high tested or exceeded to generate a decent one. Significant retracements without RSI divergences leading to my sell signals tend to be rare, though they happen every so often. I'm keeping an open mind today.

Stan and I did our second Sunday Chart Chat yesterday covering indices, forex, bonds, precious metals etc. If you want to see that the video is posted here.