Breaking Down Is Hard To Do

Another week, another inflection point on indices, and after eleven days of compression we are likely to see a resolution up or down today and whichever way this resolves is likely to deliver a daily upper or lower band ride in the direction of the break. Today is a cycle trend day and the odds of seeing a full trend day in either direction are unusually high. We'll see how that goes. The setup favors downside resolution, but the day is starting with a spirited attempt at a break up. We'll see whether that lasts.

I'll start with NDX here as Nasdaq is still driving the equities bus, and on NDX there is a possible H&S right shoulder forming here that is currently overshooting the ideal right shoulder high, but not to an extent that weakens the setup. There is an alternate read that a bull flag forming wedge is forming here, and if that wedge resistance currently in the 5800 area is tested from here then that option becomes a lot more likely. If that bull flag wedge was then to break up the minimum target would be an all time high retest on NDX. NDX 60min chart:

NDX broke over the daily middle band yesterday and needs a confirming close above today to open a possible test of the daily upper band at 5827. If NDX were to get that far I'd be looking for an all time high retest as the highest probability option. NDX daily chart:

Daily middle band resistance has been solid resistance on SPX over the last few days but SPX has gapped over it this morning and is well on the way to the upper band in the 2450 area. This may be a breakaway gap up on SPX but the break needs to be sustained into the close and needs to be confirmed with another close over the middle band tomorrow unless the upper band is hit beforehand.  A breakaway gap is bullish as long as that gap is not filled. If it is filled then it becomes a likely failed break up and becomes bearish. SPX daily chart:

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

On ES possible flag channel resistance has broken up and the minimum flag target would be at the all time high retest at 2452. There is an SPX version of this flag channel that has been established at the 2444.18 high this morning and would be breaking up at 2446. All time high retests likely at the stage IMO. ES Sep 60min chart:

On NQ the rising megaphone is no longer in play. Stan has key resistance at 5774 and I have flag channel resistance currently in the 5790 area. So far today NQ has been seriously underperforming ES and TF which may be significant. As I said, Nasdaq is driving this bus. NQ Sep 60min chart:

Whatever happens on TF for the rest of the day an all time high retest is likely.  TF Sep 60min chart:

An expansion is likely starting here and a daily band ride in one direction or the other is likely. This would often start with a headfake in the other direction and I'm wondering about that possibility here. We'll see. A sustained break in either direction may well run a while. If the obvious H&S setup on NQ resolves down and makes target that would be a decline of about 10% from here, so that would be a very serious move. We'll see how that goes today.

I have to be out most of the rest of the morning on offspring chauffering duties. Back lunchtime.

Stan and I are doing our monthly free public Big Five at theartofchart.net an hour after the close on Friday, and if you would like to attend then you can register for that on our July Free Webinars page. 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.