Drifting Up

The third day of the 5dma Three Day Rule came and went without a break down, and SPX closed yesterday above the daily middle band in a clear win for bulls. That needs to be confirmed with another close above the middle band today, and that is currently at 2364.

On the hourly chart the 50 hour MA has been converted to support, currently at 2353, and SPX is trying to do the same with the 100 and 200 hour MAs, currently at 2362 and 2366 respectively. If those convert too then the next target will be falling megaphone resistance, currently in the 2377 area, and I'd note that the falling megaphone is a likely bull flag on the bigger picture, so if that megaphone resistance breaks then the minimum target is then a retest of the all time high. SPX 60min chart:

If we see a confirming close above the daily middle band today, currently at 2364, then that opens up a possible test of the daily upper band, currently at 2390. SPX daily chart:

On ES falling megaphone resistance is a little higher in the 2380 area. ES is still on a 60min sell signal and there is still a decent fail scenario that I'd start to consider seriously on a break below yesterday's low at 2353. ES Jun 60min chart:

NQ looks tired here and there is a decent looking possible double top setup in place if we see some weakness here. NQ Jun 60min chart:

TF is close to reaching the double bottom target at 1395. TF Jun 60min chart:

Bulls want that confirming close above the daily middle band today to clear the way to further upside. Bears want a close at least two handles below it to signal a clear fail. The rest of us watching would like the tape to move a bit just to confirm that there isn't a huge party to which all other market participants were invited during RTH today, but managed to avoid inviting us to. :-)

Stan and I are doing our monthly public Chart Chat at theartofchart.net on Sunday afternoon and all are invited. Attendance is free and at that price I can guarantee that will be the best value TA for money that you don't spend this weekend. If you'd like to attend you can register for that here. Everyone have a great weekend.

The 5dma Three Day Rule - Day Three

Today is Day Three on the 5dma Three Day Rule and SPX is testing important resistance on a lot of negative divergence, with an RSI 5 sell signal brewing on the hourly chart. There are also 60min RSI 14 sell signals fixed on ES and TF, with another brewing on NQ. This test of the daily middle band may well be the last really decent chance for bears this week, and what they need to do is reject from the daily middle band at 2364/5 and close enough below it to break the 5dma at 2354/5. This is a nice setup and that could happen. The bulls need a close above the daily middle band ideally, and a close on or above the 5dma at minimum. SPX daily 5dma chart:

SPX daily chart:

On ES the IHS has formed with an undersized right shoulder and broken up. On a sustained break up the target is at the ATH retest but on a hard fail back below yesterday's low at 2348.75 this might well be a Jack In The Box bear flag setup looking for a full retest of Monday's low at 2322. ES Jun 60min (premarket) chart:

Since I capped this chart at the open NQ has made a new ATH on negative divergence and there is an impressive topping setup if a bear can be located to take advantage of it. NQ Jun 60min chart:

TF has made the higher high that I was looking for before the open at the test of falling megaphone resistance and if that trendline holds the next target within the megaphone would be back at megaphone support, currently in the 1315 area. TF Jun 60min chart:

This isn't the last promising possible inflection point for bears to turn equities back down, that would be tomorrow if bulls manage a closing break above the daily middle band today. At that point the setup wouldn't be as good as this one, but we could still see ES reverse at megaphone resistance in the 2380 area and bears would need to close SPX back below the middle band with a rejection candle reversing most or all of today's move. I like the setup today though and at the time of writing the bears are in with a serious chance. If they are to deliver on that they really need to aim for a close. under 2348 ES today (approx 2351 SPX). We'll see what they can manage.

We do a free public Chart Chat webinar at theartofchart.net on the first weekend of every month and we are doing the next one on Sunday 2nd April at 4pm EDT. If you'd like to attend you can sign up for that on the April Free Webinars page at theartofchart.net and you can see that here.

Back on the Three Day Rule

Bulls had a good day yesterday and delivered a conviction break back over the 5dma. As the decline was more than 2%, that puts SPX back on the 5dma Three Day Rule. The 5dma is currently in the 5350 area and on a daily close back below today or tomorrow, requiring a clear break of more than 2.00 handles below the 5dma at the close, then historically the odds are very high that the low 2322.25 at will be fully retested before a retest of the last significant high, which here is the ATH at 2400.98. This is a very impressive performer as a statistic, of about 60 examples since the start of 2007 there were only two that failed to make a lower low, and those were both very near misses while triangles were forming.

That said there's nothing much to suggest a bull fail here yet, and while I'll be watching the 5dma carefully today and tomorrow, against those instances that closed back below the 5dma within the Three Day Rule, a considerably larger number continued upwards after the break back up. SPX daily 5dma chart:

On ES a rising megaphone has formed from the low and the low this morning was a third touch on the now strong support trendline. That's currently in the 2349 area, slightly under the weekly pivot at 2351. As long as these two important support levels remain support there is nothing of much interest happening on the short side here. ES Jun 60min chart:

There is a clear rising wedge on NQ here and rising support has been slightly pinocchioed at the lows this morning. No clear break however and as long as that rising support doesn't break with more conviction the support trendline is still good. A possible 60min sell signal is brewing, so if we see a sharp reversal on NQ here, then that could really follow through. NQ Jun 60min chart:

A rising wedge formed on TF into yesterday's high and broke down overnight, fixing a 60min sell signal at the time. That looked potentially very bearish this morning but less so now at higher highs. There is a very obvious target area above at the intersection of falling megaphone resistance and the monthly pivot at 1379, and if we are to see a hard reversal on TF, that would be the obvious level to see it. Jun 60min chart:

There is a possible downside scenario here which I've been outlining, but while the bulls might drop the ball here, at the moment they still have the ball and there's no obvious sign that they are about to drop it. Watching the support trendlines on ES, NQ & TF for breaks which may well not happen. The 70/30 lean to the bull side that I gave on Monday in the event that the opening gap down from Friday was filled is still at 70/30 or maybe a bit higher. On SPX the next resistance is the daily middle band, currently at 2365, and bulls need to break above that on a daily closing basis.

We like to do a free public Chart Chat webinar at theartofchart.net on the first weekend of every month and we are doing the next one on Sunday 2nd April at 4pm EDT. If you'd like to attend you can sign up for that on the April free webinars page at theartofchart.net and you can see that here.

Important Resistance Levels

SPX filled the gap from Friday's close yesterday afternoon, but there is still more to be done to confirm the low. The next test up on SPX is to break the 50 hour MA, currently at 2354 and SPX is testing that at the moment. If broken the next levels are an intraday higher high over the last rally high at 2358.92 and a daily close over the daily middle band, currently at 2367. The 2359 high is a possible IHS neckline so we could see a right shoulder retracement there. If so the ideal right shoulder low would be in the 2336 area, with the 2333-6 area being decent established support. SPX 60min chart:

On ES the key level is the break and conversion to support of the weekly pivot at 2351. With the 50 hour MA at the same level that is very much the key level today. ES Jun 60min chart:

There's nothing to cheer the bears on the NQ chart, with the overnight retracement backtesting broken channel resistance and NQ breaking over double bottom resistance, well above the weekly pivot there. NQ Jun 60min chart:

TF reversed at weekly pivot last night but is now over it and testing the larger double bottom resistance. A sustained break over 1363.5 looks for the 1395 area. TF Jun 60min chart:

Overall there's really not much to cheer the bears here, but on SPX/ES we might yet see that IHS right shoulder retracement back into the important support I mentioned before the open in my premarket video. That's at 2330-2 on ES and 2333-6 SPX. If that retracement is seen, and the short term low is behind us, that area should now be good support.

It has been a few days since I last posted one of the pre-market videos that I do every morning before the open for Daily Video Subscribers at theartofchart.net, so I posted today's on my twitter at the open today.If you missed that you can see that here, and that also covers the usual USD, oil, natgas, gold and 30 year treasury futures, as well as EUR, copper, coffee and sugar futures today.

Candidate Low

A big gap down this morning from Friday's close at 2343.98, not quite filled at the time of writing with the high so far today at 2343.79. Unless SPX fails hard here this is a strong candidate low for at least a few days, and the resistance levels I'm watching are the gap fill, then declining resistance in the 2348 area, then the last rally high at 2358.92. On a break over that I'd expect a test of falling megaphone resistance currently in the 2382 area, and on a break over that the obvious target would be a retest of the all time high at 2400.98, very possibly to make the second high of a double top. SPX 60min chart:

On NDX declining resistance from the all time high is already breaking. On a sustained break over the last rally high at 5392.28 the alternate double bottom targets would be either a retest of the current all time high at 5439.58 or slightly higher in the 5460 area. NDX 60min chart:

There's a lovely double bottom setup on RUT, and on a sustained break over double bottom resistance in the 1362.79 area the double bottom target would be in the 1390.50 area, with falling megaphone resistance currently in the 1382 area. RUT 60min chart:

My view is that the short term low is probably in, and as soon as the opening gap on SPX fills, if it does, then the 70% option is that the short term low is in. If so then this would be likely to deliver an ATH retest on NDX and possible on SPX as well. Less likely but still possible on RUT. After the next high we should see the main decline begin into a target low period in July/August.

Roll On The Weekend

I've been suffering with a bad back all week, and this has been disrupting my sleep so I'm hoping to catch up on sleep at the weekend, which I'm very glad is starting in a few hours. In the meantime ES is just chopping around waiting for nuggets of news about the progress of the Healthcare bill, which at the time of writing seems unlikely to pass today.

Yesterday's high has held so far on SPX and yesterday's high was of course a very obvious level for the rally to fail, so that may well continue to hold. If so SPX should at minimum retest Wednesday's low and I'll be watching possible trendline support now in the 2330 area. On a break over yesterday's high there are multiple resistance levels in the 2365-70 zone.  SPX 60min chart:

The bear flags on both ES and SPX broke down yesterday and have not yet made the minimum targets for the break at the retest of Wednesday's low. That target will most likely be made in the next couple of days. ES Jun 60min chart:

NQ made a marginal higher high today into the 61.8% fib retrace target area and broken double top support. This high is in the 5390-5404 target zone that I gave on Wednesday as an ideal H&S right shoulder high area if an H&S was forming. The 60min buy signal has reached the full target and this is a candidate rally high area. NQ Jun 60min chart:

TF made a marginal higher high today as well, reaching the 50% fib retrace target and a possible 60min sell signal is now brewing. Again this is a candidate rally high area. TF Jun 60min chart:

My lean here is that unless we see a gap up through resistance over the weekend, the rally highs are likely in on all three indices and the next obvious target on all three is a retest of Wednesday's lows and likely lower.

Everyone have a great weekend :-)

The Rally Is Flagging

The rally that the bulls failed to manage yesterday has been delivered today, with SPX sustaining some trade above the daily lower band, though albeit not by a lot. So far the rally has retraced 50% of Tuesday's decline while forming a very nice rising channel. So far this is a classic bear flag setup that on a break of channel support should at minimum deliver a retest of yesterday's low. SPX 5min chart:

On the hourly chart the RSI 5 buy signal made target and on the RSI 14 natural resistance at the 50 level has been reached. This is the natural fail area but  in the event that SPX goes a bit higher the next level up would be at the 50 hour MA, currently in the 2367 area. SPX 60min chart:

On the daily chart a possible retest of the daily middle band at 2370 would be a decent match with a 50 hour MA test. I'm expecting a fail close to today's highs but that would be the next level of resistance if this very bearish setup is slow to deliver. SPX daily chart:

The ES 60min buy signal has reached the possible near miss target, as has the NQ signal, and the TF buy signal made the full target. Flag channel support on ES is in the 2342 area, and on a break below the next leg down would likely be have started. That leg should at least retest yesterday's low but may go considerably lower.  ES Jun 60min chart:

Stan and I are doing a free educational webinar at theartofchart.net an hour after the close today, and that will be the third webinar in the 'Technical Patterns You Can Profit From' series. If you would like to see more of the methods that Stan and I have developed to help forecast market direction over many markets then you can sign up for that on this page here.

Markets Are Like Onions

That was a very powerful break down yesterday, ending what I understand was the longest period on SPX ever without a 1% daily decline. The rising wedge from November 2016 has broken down. The minimum target retracement should be the 38.2% fib retracement target in the 2280 area, and the next trendline support is rising wedge support from the February 2016 low, currently in the 2220 area and rising of course.

In the short term the open sell signals on the daily and hourly charts have made target, and I am looking for a topping pattern. I am also watching for the potential lower band ride that may be starting here, and in the case of a strong lower band ride we may see the daily lower band, currently at 2347, act as resistance, and the 3sd lower band, currently at 2335, act as support. If bulls can convert the lower band at 2347 to support then they have a shot at a strong rally here that could potentially retest the ATH to make a likely second high of a double top. SPX daily chart:

Peeling away a couple of layers down to the hourly chart, both RSI 14 and RSI 5 buy signals have fixed today, as well as buy signals on all of the ES, NQ and TF hourly charts that fixed overnight. That is encouraging for a rally here, if bulls can break back above the daily lower band, which they have failed to manage so far but are trying again now. At the moment there is a perfect 70% bullish falling megaphone formed on SPX and that's a decent pattern that could deliver that ATH retest.

Sometimes though these patterns form and then take the lower probability 30% option and break down. If seen here the target would currently be in the right target range 2265-75 and in effect the falling megaphone would be that topping pattern that I'm looking for. This is a relatively rare setup but happens regularly nonetheless. If bulls can't break resistance and deliver that strong rally then that may well happen here. SPX 60min chart:

Peeling away more layers down to the 1min chart we can see that from the rally high at 2359 yesterday a triangle has formed on SPX, and has broken up and may be backtesting now before a terminal thrust up begins. If bulls can make that confident break up over the daily lower band then this setup could deliver that strong rally. if the break up fails here then I'd expect at minimum a retest of today's low and very possibly continuation down from there. If the hourly falling megaphone breaks the support trendline then ideally that would backtest the broken support trendline and continue directly down. If we see that then we could see that 2265-75 target range made in the next few trading days. SPX 1min chart:

So there we have it. We have been watching bulls and bears duking it out in a key support and resistance area today and a sustained break in either direction from that range may well define the next few days. We'll see how that goes.

Stan and I are doing a free educational webinar at theartofchart.net an hour after the close tomorrow, and that will be a third webinar in the 'Technical Patterns You Can Profit From' series. If you would like to see more of the methods that Stan and I have developed to help forecast market direction over many markets then you can sign up for that on this page here.

The Rising Wedge Breaks Down Hard

The SPX rising wedge broke down slightly yesterday and then followed through hard this morning. I have a minimum target at the 38.2% fib retracement in the 2280 area. However I would normally expect to see a topping pattern at a high like this and while there is some potential for an H&S to form, I'd note that about 70% of SPX significant highs are made with double tops, so we may well still see an ATH retest before the main decline begins. If we are to just see a move to 2280, and that is going to be set up with a double top, then the obvious place to see the rally to the second high start would be in the 2340-50 area, and I have drawn in a couple of possible bull flag support trendline options for that. The first one has been tested at the current low today. The hourly RSI 14 sell signal has made target but no positive divergence yet. SPX 60min chart:

On the daily chart the middle band has broken down hard and the lower band has been tested at the lows. If we see a move to the 3sd lower band in the 2340 area that would be an extreme level of short term oversold that would normally deliver at least a modest rally. In the absence of a large rally today the RSI 5 sell signal should make target at the close. SPX daily chart:

I'm seeing some H&S potential on ES here if we see a rally into a backtest of broken triangle support in the 2362 area (ideally). ES Jun 60min chart:

NQ made a new ATH this morning and then broke down from a small double top with a target in the 5340 area that has not yet been made. NQ Jun 60min chart:

Yesterday morning's double-top setup on TF broke down hard this morning and has made target. TF has broken the last low at 1350 and the obvious big level not far below is the possible H&S neckline in the 1340/1 area. TF Jun 60min chart:

I'm watching for divergence here and looking for possible high retests starting soon on SPX/ES & NDX/NQ. Less likely on RUT/TF. We may not see those retests but if seen those should set up some great entries for the main decline to come. Today is a cycle trend day and it may be that there will be no significant rally until the last hour or the close.

Shrodinger's Tortoise Race

Everyone knows the story of the story of the race between the tortoise and the hare, but what if the race had been between the tortoise and another tortoise? Which tortoise would have won the race? The answer is that no-one would know, as no-one would have remained awake until the end of the race. Moving sideways into quantum mechanics for a moment, one could then argue that in the absence of an observer, with the arguable exception of the tortoises, that neither tortoise won the race, if indeed there had been a race at all.

Where am I going with this? I'm just observing that the market tape has been impressively dull lately, and that it will be nice when things speed up a bit, at the end of this seemingly endless topping process. In that regard though, things are at least moving along a little.

On the ES chart the double top target at 2366.25 from Thursday morning was eventually reached today after an epic decline of twelve handles or so. ES Jun 60min chart:

On the SPX hourly chart rising wedge support has been tested again, and has broken slightly. Before bears get too excited I'd note that this means we are now looking for a topping pattern, and that may involve a retest of the all time high if the pattern if that pattern is a double top, which is the case about 70% of the time. SPX 60min chart:

The daily middle band was tested at the lows today and is still holding so far. SPX daily chart:

How will this gripping drama end? Can anyone stay awake long enough to find out? Only time will tell :-)

Little Ado About Even Less

Remarkably SPX/ES is still in the same inflection point it was yesterday afternoon. I had expected to see some resolution either up or down on ES overnight but no, so both targets are still in play at either the strong support zone at 2368-72 SPX with rising wedge support, the ES weekly pivot, the 50 hour MA and the daily middle band, or a retest of the rally high at 2390. I'm expecting to see one of those targets hit today and and am leaning bearish, though without any great conviction. SPX 60min chart:

Daily upper keltner band resistance is still at 2391 and SPX is still on a daily RSI 5 sell signal. SPX daily chart:

The ES action overnight cautiously looks like a bear flag forming. ES Jun 60min chart:

The NQ action overnight also cautiously looks like a bear flag forming. NQ Jun 60min chart:

TF made a slightly lower high under 1390.5 and rejected there to test the monthly pivot as support. That could be a double top breaking down slightly at the AM low so far, but until the monthly pivot at 1379.4 breaks with some conviction the setup looks more like a bull flag. TF Jun 60min chart:

Stan and I did a free public webinar yesterday on our big five stocks. If you missed that just click the image below and that will take you to our March Free Webinars page where the recording is posted. Everyone have a great weekend :-)

Inside Day .... Probably

The bull flag channels broke up on both SPX and ES, and the obvious next target is a retest of the ATH on both. As long as wedge support holds, currently at 2365, then my working assumption is that, after an inside day today, an ATH retest is next, with a possible target above at wedge resistance, currently in the 2417 area. First support is at the 50 hour MA, currently at 2370/1. SPX 60min chart:

On the daily chart the rally high is a little under the daily upper keltner band, currently at 2391. Support is at the daily middle band, currently at 2370. SPX daily chart:

On ES I noted last night that a possible rising megaphone was forming, and that possible megaphone support is now in the 2357.5 area. ES respected that resistance trendline overnight, and a small double top has formed that on a sustained break below 2377.5 would look for 2366.25, a very close match with a backtest of the weekly pivot at 2365.50. On a failure to sustain trade below 2377.75 the next target would be the globex high at 2389.25 and probable continuation higher. The intraday action since the AM is a 70/30 bearish leaning triangle. ES Jun 60min chart:

There is also a rising megaphone on NQ and megaphone support is currently in the 5381 area. The intraday action since the AM low looks like a bear flag forming. NQ Jun 60min chart:

On TF the LOD so far is at the rising support trendline I was looking at though I'd note that a 60min sell signal has formed and fixed there, which suggests that the support trendline will probably break soon. That's now at 1382.3. TF June 60min chart:

Overall I'm leaning 70/30 towards a retest of 2370 area support on SPX and a possible retest of rising wedge support, currently in the 2365 area. As I've been writing the NQ flag and the ES triangle have broken down and the TF support trendline is being retested. That will likely break soon. If SPX rising wedge support breaks at the possible retest then we may well see a new retracement low soon after that.

As I mentioned on Stan and I's free public webinar on our 'Big Five' group of AAPL, AMZN, FB, NFLX and TSLA at theartofchart.net is actually an hour after the close tonight, rather than last night as had been stated on the March Webinar page, and if you'd like to attend you can register for that on this page here.