Lost in Translation

I mentioned last night on twitter that at the end of the day there was an unusual situation where ES was holding the weekly pivot there as solid support, and TF had established the weekly pivot as solid resistance. This is a rarity and can't last long unless they just chop sideways together.

ES built on that weekly pivot support to make a new all time high this morning. Was that bullish? No, as there is nothing inherently bullish about a high retest. Every double top setup requires one and they aren't bullish. The thing I was watching was what TF was doing with the weekly pivot  .........ES Dec 60min chart:

TF held the weekly pivot all night as resistance and there is still a very nice looking H&S fully formed there to add to the double top setup here on ES that has improved considerably in quality overnight. In the hour after the open I shorted 1335 twice on TF (just under the weekly pivot at 1335.8) and it rejected over five handles both times with twenty minutes, so that is still solid resistance. TF Dec 60min chart:

The TF H&S needs to break down today really if it's going to, but as long as that weekly pivot is holding as resistance today then this is a nice setup for a very overdue modest retracement. and I'll keep shorting TF at 1335 until the H&S delivers or the resistance fails. If there is no retracement today then the chances of seeing a retracement here drop dramatically, as while the historical stats for today are definitely bearish, the first day of the month tomorrow tends to be a bad day to be relying on a bear setup to play out. The H&S on TF will also by then be starting to look more like a hearse limo, a rarer and less predictable pattern.

As an aside this setup is a good illustration of a problem trading correlations that I've talked about before. I've been expecting ES to drop on the basis of the TF short setup, but I didn't short ES, I shorted TF. That's because I know from experience that correlations shift all the time. If you're so confident that USD is going up that you are thinking of shorting gold, don't do it, cut out the middleman and go long USD. There's less chance of your trade being lost in correlation translation.

Stan and I are doing our monthly public (and free to all) Chart Chat at theartofchart.net on Sunday and you might like to attend if you enjoy top quality TA or have any interest in where the prices of a wide range of tradable instruments are likely to be going. If you'd like to attend then I'll be posting the link to register tomorrow.

Testing Support Hard

My expectations for the bears yesterday weren't high, but they put in a decent showing, and they have a chance today and tomorrow to deliver some extremely overdue retracement. Tomorrow is the only day this week that leans bearish historically, in part or mainly because it is the frequently bearish last trading day of the month. Obviously Thursday leans bullish as the first day of the month.

The main chart that I'm watching here is the TF chart, and a decent quality H&S has formed there looking for the 1307 area on a sustained break below yesterday's low at 1327.50. Since I capped that chart TF has backtested the weekly pivot, completed the H&S pattern and is now testing the neckline. Unless TF breaks back over the weekly pivot at 1335.8, my working assumption is that the H&S will play out. TF Dec 60min chart:

ES hasn't retested the high as I was thinking it might. That means no high quality reversal pattern here but there is unfinished business below at 2168-70 and if the H&S on TF breaks down then that might be the target on ES. Important resistance today is at the weekly pivot at 2200.50. That was the main battleground yesterday and may be today as well. ES Dec 60min chart:

Our expectations for the move aren't big, and we're expecting further upside after the retracement. I'll be watching for a decline pattern to form if we see that retrace here, and if I find one I'll be posting that on twitter as and when it breaks up.

Splodgeness Abounds

I christened a new TA setup in yesterday's Chart Chat and I've clipped out the beginning of that to show what I was saying on the ES/SPX, NQ/NDX and TF/RUT charts then. I'm not certain that this innovation will guarantee my elevation to the TA Hall of Fame, but at the least it was funny and you can see that clip here:-) - The Springheel Splodge revelation.

As I am saying in the clip, the bears have something to prove here in terms of showing that this might be a two way market, but there is a retracement coming at some point that should retrace this triangle thrust back to the 2168-70 area and possibly lower. I talk in more detail about the short term setup in the video I recorded this morning. The charts below are the ES, NQ & TF charts I posted for members at theartofchart.net this morning.

ES Dec 60min chart:

NQ Dec 60min chart:

TF Dec 60min chart:

I talk in detail about these charts in my premarket video for Daily Video Service members at theartofchart.net this morning and you can see those here. These usually run about ten minutes but there were so many interesting setups today (all outside equities), that I took some extra time and also covered the HG, KC & SB charts which aren't covered every day, in addition to the usual eight tickers which are ES, NQ, TF, DX, CL, NG, GC & ZB. You can see that video here.

We are running a one day Cyber Monday sale at theartofchart.net today with 20% off all our standard prices and if you are thinking of subscribing, or if you are an existing member and would like to pay less than the standard price, then you can take advantage of this offer here. Remember you must enter the code when you subscribe to get the discount. As always the lower rate is locked in for life as long as your subscription is continuous. No continuous subscriber ever pays more than the rate they subscribed at.

Happy Thanksgiving

The holiday tape has defeated the nice looking retracement setup at the start of the week. There should still be at least some retracement over the next few days, but after a holding like a champ until late yesterday afternoon the decent resistance trendline on RUT finally broke. What there is of the remainder of the week is low volume holiday tape, so it may well be that we won't see much of interest on the indices before next week, and Monday and Tuesday both lean bullish historically. RUT 60min chart:

ES continues to inch upwards against support at 2193, and until that breaks there's nothing much to see here on the short side. As and when that breaks there's a very strong case for a retracement back to 2168-70, but with the negative divergence on the SPX daily RSI 5 lost on the last move up yesterday I'm not currently seeing much to suggest a move lower than that here. ES Dec 60min chart:

I'll be enjoying the holiday time off and remembering the very strong links that most branches of my family have with the USA. Among many other links the lyrics to the Star Spangled Banner were written by Francis Scott Key while he was briefly a prisoner on my great great great great grandfather's fleet in the War of 1812, though it was a short confinement, and included dinner with him (Vice Admiral Alexander Cochrane) on his flagship HMS Tonnant. Everyone have a great Thanksgiving. :-)

Every Silver Lining Has A Cloud

The SPX high this morning was 0.09 handles under the ATH, so I'm treating the bull flag target at that retest as made. That's the good news for bulls and it may well be the high point of the week on SPX and RUT, though NDX is looking toppy here too, though less obviously testing serious resistance at the high this morning.

The 60min charts on all three are leaning towards seeing some well overdue retracement starting in this area, and if seen that may well dominate the rest of the week. There is also a possible RSI5 / NYMO sell signal brewing here on the SPX daily chart, which I'm watching with interest. SPX daily chart:

RUT has reached the resistance trendline I was looking for and that's looking pretty solid so far. It wouldn't take much to fix both RSI 14 & RSI 5 sell signals on this chart. RUT 60min chart:

On SPX the obvious retracement target and support zone would be in the 2140-60 range. There is a decent looking possible double top setup on SPX now of course, but I won't be taking it particularly seriously unless SPX can punch back down through the daily middle band, currently in the 2145 area.

TGIF

It's been a long week & I'm very happy it's Friday. I'm out most of today so just a quick post before I go.

Not expecting any real fireworks today. ES/SPX on the thrust up from that triangle and has reached the minimum target at a new swing high. There is an open target at a retest of the all time high on SPX, and the high so far today was just four handles below that, but it doesn't have to be hit now. ES Dec 60min chart:

NQ still looking pretty heavy and a 60min sell signal fixed overnight. The first support trendline shown below has now broken. NQ Dec 60min chart:

A 60min sell signal fixed a couple of days ago on TF and it hasn't made much progress up since. I have possible channel resistance in the 1322-4 area but I'm doubtful about hitting that today. Maybe. TF Dec 60min chart:

If you missed the free webinar Stan and I did last night the recording for that here. If you are a student of market history then you'd likely find the pattern and fibonacci analysis I showed on the 1987 and 2008/9 crashes very interesting. Everyone have a great weekend.

Backtesting the Triangle

It's been a boring day, but what has been happening is that the triangle / bull pennant that broke up yesterday is doing the usual triangle sequence of backtesting the break before the triangle thrust up. After the triangle thrust up ends of course it's then 90%+ probable that the thrust is fully retraced back to this backtest low.

So is the backtest finished? Maybe, though normally it would go a bit deeper. It may need a little lower before the triangle thrust begins. When the thrust does begin I'd be expecting to see at least a full retest of the all time high on SPX. ES Dec 60min chart:

One thing I'm watching on RUT, now that RUT has made a new all time high, is channel resistance on the channel that formed from the rising wedge on RUT from the February low. That is very much a possible target as ES/SPX makes the triangle thrust and that is currently in the 1322 area. RUT daily chart:

After the triangle thrust is retraced I'd be leaning towards a deeper retracement, though unless something significant changes, my lean is bullish overall for most of the rest of the year.

Stan's doing a free webinar after the close tomorrow at theartofchart.net on Trading Futures using Non-Traditional Elliot Wave. Well worth attending if you have an interest in TA and if you'd like to come you can register for that here.

The Triangles Break Up

Apologies for the late post today. My wife has been unwell and I've been juggling various priorities today.

SPX has spent the last couple of days forming triangles on both ES and SPX and the triangles have now broken up. This should deliver at least a retest of the current swing high at 2182.30 and when seen that will set a possible 60min sell signal brewing. It could reverse there, though my lean would be to then see a retest of the all time high at 2193.81, as I also have a larger fixed flag target there. Hopefully by then the current move will be better defined with an identifiable pattern. SPX 60min chart:

ES Dec 60min chart:

Now that the triangle has broken I'll be sifting through the SPX/ES, NDX/NQ & RUT/TF charts tonight looking for patterns and trendlines & I'll be reporting back on that tomorrow. Until then this is is all still fairly amorphous in terms of the trendline/pattern setup and I'm keeping an open mind.

I'm unable to add the screencast links for these charts at the moment as Screencast are experiencing technical difficulties. I'll be adding those when I can.

Volume Spike and Triangles

There were two back to back volume spikes on the daily SPX chart last week and I'm looking for that significant high. We could see it here but unless SPX can break down through the 2154 (2150 ES) area support that held on Friday the short term pattern setup favors a retest of the current rally high in what might then be the second high of a small double top: SPX daily chart:

Both SPX and ES have formed triangles and they aren't quite the same but they have both broken up, and if that is a true break up, then this is the backtest before the thrust up from the triangle that should at least deliver a retest of the current rally high. SPX 5min chart:

On ES the key level that needs to hold today is 2150 again as that is triangle support. Holding so far this morning. A break down through 2150 invalidates the first break up. ES Dec 60min chart:

The key today is the same support area that dominated Friday. If SPX can break Friday's low then the downside opens up. If not then a retest of the rally high should be next & I'd be looking for possible resistance there.

Knife Fight at 2150 ES

Just a quick post today as I'm not feeling well and my ability to multitask declines sharply when I'm feeling under the weather. I've mainly been calling the turns on the epic knife fight at 2150 today and if you aren't following my twitter you'll have missed that. I'm going to just use the SPX 5min chart today as it shows the short term inflection point here clearly. Price needs to pick the direction, this pattern favors the bulls 70/30 but bears could still break this down.

The pattern from the close before the election on SPX was a rising channel that broke down with a possible double top setup that had a higher risk that usual of developing into a bull flag because the second high was lower. With the intraday low today a perfect triangle has been established that in this context would normally be a bull pennant looking for a retest of the rally high. If bears can't break triangle support and deliver the 30% option, that's very likely exactly what this is. If we do see that rally high retest I'd be looking for that on Monday and would be expecting that to likely be the second high of a double top.

I'd note that on a break down, this setup is also a passable looking H&S that would target the 2123 area on a sustained break below 2153 SPX, but until we see that the break up is the higher probability outcome short term. SPX 5min chart:

Everyone have a great weekend :-)

Wounded Mammoths

SPX has gone a bit higher than Stan was expecting this morning, but there was a big volume spike yesterday that strongly supports his expectation that a significant high is being made here, and that we may well retrace much or all of this powerful post election rally. These don't always deliver, and I haven't had a chance to run through performance over the last twenty years yet, but I've put these down as 85% odds of a significant high within three days and I think that's conservative. The only fail I can recall offhand in the last few years was in March this year. SPX daily chart:

What could fuel this selloff? Well we'd often see a full retracement after a big move caused by a news event. That's a 'return to the scene of the crime' retracement, and these happen all the time over a wide range of trading instruments. My eye is also drawn to a couple of the stocks that we've been covering in our Big Five Service at theartofchart.net, and of the five stocks we cover there, AAPL, AMZN, FB, TSLA and NFLX, I'm showing AMZN and FB below, both looking very bearish here, though of the others AAPL and TSLA aren't looking much better than these two.

Could these wounded mammoths fuel a big decline? Well they might add to one, but these are longer term setups and if we see this retracement on SPX we'd be expecting it to be all over with a few days, and likely rallying from there. I also remember chatting to a trader friend about the implications of a very bearish post I wrote on AAPL on 2nd October 2012 (you can see that here), when we were discussing the impact on the equity indices of the 40% to 50% falling in AAPL that I was expecting then. We both thought that would be a significant drag on index prices, and while AAPL then duly fell 44% or so into June/July 2013, SPX started a bull run in late 2012 that took it up slightly under 40% into the end of 2014. That didn't leave me with the impression that these kinds of correlations are reliable.

AMZN has just broken down from an H&S and our main target for this move involves a further decline of about 20%. This is a setup that has been developing for a while & it should make that target. It may not stop there, but if it's going to turn back up, that's the likely place. AMZN daily chart:

On FB the likely decline is a bit over 15% from here. Again it might not hold the target trendline. We'll see. FB 60min chart:

Of the others AAPL has an obvious target about 20% lower than it is at the moment and TSLA is starting a triangle thrust down from a big triangle that has formed over the last year. We don't have a strong target area on TSLA, but the triangle thrust down is only just starting, and I'd expect it to run a while.

These are big moves starting down on some big names and they might well help deliver this short term retracement. Longer term they do seem likely to at least mute any bull moves on the Nasdaq over the next few weeks. These aside though, the volume spike on SPX yesterday is a strong signal to look for a significant move down on equity indices in the near future.

We've been nailing the Big Five very well since we launched the service a few weeks ago. If you're interested we offer a 14 day free trial that you can find here.

Election Newsbombs - Flags Breaking Up

My apologies for the lack of a post yesterday and the late post today. Yesterday sort of ran away on me and I badly overslept this morning having been working much of the night. Hopefully some of you caught the premarket video that I tweeted yesterday morning, and the tweet I sent close to the globex lows noting that the double top targets on both NQ and TF has been reached, and that I had no open pattern targets looking lower. If you aren't following me on twitter and you'd like to, my twitter handle is shjackcharts.

The overnight action was wild, but was almost entirely confined to globex, leaving a very strange situation where I have open double top targets on NDX and RUT that have not been made, but my lower double top targets on NQ and TF have been made. Equally the broken rising wedges on SPX and RUT have not yet come close to the usual minimum target at the 38.2% fib, but on ES and TF that target was tested overnight and there was a strong reversal back up there. Given that I generally take the RTH indices as the primary setups this is a very unusual and interesting conundrum which is definitely giving me something to think about here.

What are the RTH indices telling us today? Well I was saying in late October that any move down on SPX would need to be impressive to stop the setup here looking like a bull flag. That flag falling megaphone has broken up today with the obvious target at the retest of the all time high at 2193/4, though as I'll mention later that target is a bit suspect. SPX daily chart:

There is another bull flag setup on RUT, and my upside target for a rally here was a test of that falling channel resistance with broken double top support at 1203/4. That test was made today and RUT broke up through it. As I mention on the chart that confirms a small IHS target in the 1228 area and the first flag target is obviously a retest of 1263. RUT 60min chart:

Stan however takes his lead from the futures charts rather than the RTH charts, and what he is seeing here is a wave B rally with an ideal target in the 2175 ES area (about 2179 SPX) before a hard reversal back down in wave C. Given that Stan called the likely rally target at 2151 ES on Monday, with the high last night at 2152, and called the decline from there back to the 2060s in his video last night (for Daily Video Service subscribers at theartofchart.net) before the 2152 high, I'm taking that very seriously, though that move likely happened a bit faster than expected and overshot a bit to make those double top targets on NQ and TF. I'll be looking for possible resistance there.

The Powerful Rally Arrives

I was saying on Friday morning that the type of lower band ride that SPX was on tended to end with a powerful rally, and that an obvious place to start such a rally was at the test of the 200dma, and here we are, looking at a powerful rally off Friday's almost perfect test of the 200dma. So far today this is a trend up day on SPX and that may well be the case all day, though SPX is now very close to testing important double resistance at the SPX daily middle band and 2128, with ES declining resistance at 2123/4. It's possible that this rally might come to an abrupt stop there, so I'm watching that test with great interest. SPX daily chart:

 With this morning's gap up over the 5dma at 2101/2 SPX looks very likely to go back on the 5dma Three Day Rule today, as long as it doesn't fail to close above that today. Assuming that is the case then the rule is that if SPX closes back (2+ handles) below the 5dma on Tuesday or Wednesday this week, then we should see a retest of the 2083.79 low shortly afterwards. I think that may well be what we see, election news permitting. SPX daily 5dma chart:

There will be a lot of market moving news this week, which I'm very wary of, and if you've been looking for a good time to go fishing for a couple of days, then I'd suggest that this might be a good time to do that. The tape is already rough, and may well get rougher as the election news develops.

We did our monthly public Chart Chat at theartofchart.net yesterday, and if you missed that, then you can find the recording for that on this page here. This week's Weekly Call is posted here looking at setups on the futures for Live Cattle (LE), Gold (GC) and Coffee (KC). Last week's setups did extremely well, and that happens a lot on this free to all service so if you can trade a variety of instruments then I'd suggest taking a look.

We've also been killing it on our new Big Five service covering AAPL, AMZN, FB, TSLA & NFLX since we launched it a few weeks ago & did particularly well with it last week with the big declines on AMZN & FB that we were expecting it. Killing it so far this week too. Stan's working up a promo on that this week & I'll be posting that as soon as it's ready.

Looking at the Bigger Picture

This has been a powerful lower band ride down on SPX, and both SPX and NDX have been trading between the 2sd and 3sd lower bands. These don't tend to last long and usually end with powerful rallies. The low on SPX today was a test of the 200dma and that is an obvious possible launch area. SPX daily chart:

The most bearish looking of SPX, NDX and RUT is NDX, as there is an open double top target there at 4600. Testing decent support on the way in the 4655 area. NDX daily chart:

I posted this RUT chart on Tuesday and was saying that I'd expect this double top to make target at 1149. I'd note that the 200dma is currently at 1150. That is a very possible support area, and possible low for this move. The current low on RUT is at 1156 and it should make the full target, though that might be after a strong rally. We would usually see a strong rally before any meaningful low could be made, and we haven't seen one yet. RUT daily chart:

Resistance on ES is clearly in the 2092/3 area (2098/9 SPX area) today. If bulls can convert that to support then we likely see a strong rally. If they can't then I'll be looking for that double top target on RUT.

Stan and I are doing our monthly public Chart chat on Sunday. This is free to all and if you'd like to attend you can register for that on this page here. Everyone have a great weekend. :-)

Interesting Day

I mentioned on twitter yesterday afternoon that the positive divergence that was absent at Tuesday's lows was very much present at Wednesday's lows. 60min buy signals have fixed on ES and NQ and a rally looks good here, though if bulls lose VWAP at 2093.5 this morning then we might retest the overnight lows. ES Dec 60min chart:

On the NQ and TF charts I've pointed out that there are still open double top targets that have not yet been reached. That looks like unfinished business below, so while a rally looks good here, I'd be leaning against a retracement low being in yet. NQ Dec 60min chart:

TF Dec 60min chart:

A lot of markets looking very interesting this morning so I tweeted the premarket video that I recorded for Daily Video Service subscribers at theartofchart.net this morning. You can see that here. Today should be an interesting day, from a TA perspective at least :-)

Stan and I are doing our monthly public Chart Chat on Sunday and that is free to all so you can register for that here if you want to attend. We will be covering the usual 30-40 instruments across all the main trading markets and will be well worth attending unless you have an allergy to high quality TA, or if you feel that seeing the higher probability paths for the prices of the instruments that you trade is cheating.

Weekly Stat Target Finally Reached

Three months ago or so I called a likely retracement target back in the 2100 area on the punch over the weekly upper band and a few weeks ago I clarified that as requiring a test of 2109 at minimum to satisfy the stat. That target was finally reached yesterday. I suspect that was the longest time taken to reach that target from my past examples.

SPX is not showing positive divergence on any timeframe yet and I doubt that any kind of meaningful low was made yesterday. I have possible flag support in the 2090 area and on a hard break down I'd again be looking at the 38.2% fib retracement target at 2047. SPX daily chart:

I posted the RUT double top on Friday last week talking about the likely target in the 1140s. RUT hasn't made that target area yet and I think it most likely will make it before this retracement is over. RUT 60min chart:

The main thing I'm watching here on SPX is the daily lower band ride and positive RSI divergences. Not seeing any reason on either to think that a significant low has been made. I'll keep you posted.

Mixed Bag

Most of the afternoons lately have been impressively dull and they all seems to merge into each other after a while. the main takeaway from yesterday and last night though was that, so far at least, the ES weekly pivot at 2128.75 (2133/4 SPX area) has been very solid resistance. As long as that remains the case the obvious next target is at least a retest of the last low at 2112.5 ES (2117.5 SPX area). ES Dec 60min chart:

The setup on NQ looks bearish here, with a clear triangle that in this context would break down into continuation most of the time. At the time of writing that triangle has broken down and NQ is retesting the retracement low. NQ Dec 60min chart:

Any decline here may not get far though. On the RUT 60min chart both RSI 14 & RSI 5 buy signals have fixed, and that RUT has just traded sideways this morning as ES and NQ have been declining. This looks as though it is just marking time until ES & NQ are ready to rally. RUT 60min chart:

A retest of the current retracement low on ES looks likely, but I'm doubtful about Es extending further down without at least a strong rally. With the election just a week away now and the Fed tomorrow, this is not currently a market to get married to any position long or short.

A reminder that Stan and I are doing our monthly public Chart Chat at theartofchart.net on Sunday. That is free to all and seats are limited to 100 so if you plan to attend I'd suggest registering without much delay, and you can do that on this page here. We will be covering the usual 30 to 40 instruments across all the main trading markets, and delivering the best forecasting that can be achieved using math rather than genuine clairvoyance, so if you don't know any genuine clairvoyants, and are interested in the likelier paths for the instruments that you trade, you should attend. At a total price of just zero dollars, this could well be the best value TA investment that you make this year :-)