Are We Having Fun Yet?

I posted my premarket video on my twitter before the open today as I was going out and wasn't certain I'd be back before the close and if you missed that you can see that here. What I was talking about on ES here was a high quality falling megaphone that had formed on ES on which pattern resistance had been tested twice overnight. If that continued to hold then the likely retracement targets were either a 50% retracement back to the 2430 area or a move back to megaphone support, hit at lunchtime today at 2408.5 and very possibly bullishly underthrown at the current intraday low at 2402.25. This brings us to another important inflection point.

I was saying yesterday morning that if an H&S was forming on SPX then the ideal right shoulder high would be in the 2446 area. Yesterday's high was a close match at 2443, and the move today has retraced back to the neckline and broken down slightly through it with an H&S target in the 2385 area if this break down is sustained. If it isn't sustained, and the bull flag megaphone plays out, then this is another Janus flag, and with the bull flag falling megaphone underthrowing bullishly on ES, if we see a strong rejection back up here then there would be a high probability target back at a retest of the all time high, which would fix on a break over flag megaphone resistance on ES, currently at 2444/5. SPX daily chart:

I was also talking about a possible H&S forming on NDX yesterday morning and that too has completed and broken down with a target in the 5380 area. In theory the same double top / Janus bull flag calculation applies on NDX, but that's complicated by the also perfectly valid alternate triangle setup that has also completed and broken down there. We're going to need to see what NDX does next to discern which pattern we are looking at but on both triangle and Janus flag cases we would likely see a strong rally back over the neckline/triangle support in either event. NDX daily chart:

The ES and NQ futures charts below were done before the RTH open for Daily Video Service subscribers at theartofchart.net, and are the ones shown on the video linked in the first paragraph. If you are interested in trying our services a 30 day free trial is available here.

ES made it back to megaphone support and has underthrown that at the low in a very possible bullish underthrow. The underthrow means that at the next test of falling megaphone resistance, currently at 2444/5, that trendline would likely break, fixing a minimum bull flag target at a retest of the all time high. ES Sep 60min chart:

I gave key resistance on NQ yesterday at the weekly pivot at 5768 and that was broken slightly but never converted to support before today's slide began. As I've been saying, NQ is driving this bus. NQ didn't quite reach my channel support trendline but the current low has established a possible falling wedge resistance trendline. If that holds the next target within the wedge will be falling wedge resistance, currently in the 5753 area and falling rapidly. NQ Sep 60min chart:

TF has retraced to retest Tuesday's lows. There's a good case for seeing an all time high retest as long as we don't see a hard break down there. TF Sep 60min chart:

SPX tested the 3sd (three standard deviation) lower band at the low today and that is generally good for at least a decent rally,  which we have been seeing. Tomorrow is a cycle trend day and there is a decent bull case here arguing that we might see a very strong rally tomorrow, possibly adding a fourth crazy reversal candle to the three huge back to back candles put in Tuesday through today. I like the bull scenario from here though it's it's best to stay flexible and not get married to either longs or shorts. Whatever happens we have just finished a long period of compression and have started what is likely to be a significant period of expansion. That's likely to last through July into August on our projections so don't expect a fast return to business as usual.

Stan and I are doing our monthly free public Chart Chat at theartofchart.net on Sunday and it looks like we'll have a lot to talk about. If you would like to attend you can register for that on our July Free Webinars page. Seats are limited to 500 and we already have more registrations than that (some of whom won't attend) so if you would like to attend I'd suggest doing that sooner rather than later. I would also note that this week's edition of The Weekly Call is posted and that the model portfolio there is up 170% in the seven months to June 23rd, obviously well on course to make our target minimum 200% return over the first year. As and when that target is reached we're thinking of making the strategy there a bit less conservative. That's a free weekly service and if you trade futures I'd suggest adding it to your reading list.