A Moment Of Clarity

A week ago I commented on my SPX hourly chart that the obvious target for this move was falling channel resistance and SPX finally hit that at the high yesterday. After the confused mess of the last five days of trading that at last gives a clear setup here.

This falling channel is a likely bull flag which on a break up would have a minimum target at a retest of the all time high. The rising wedge from the March low has already retraced over 38.2% of the wedge so SPX could break up now into that retest. The open 60min buy signal likes that option and arguably so does the falling megaphone that has formed on the RSI 14 over the last few days. On the other hand a reversal here could well still reach the ideal 50% retracement target at 2405 that I gave at the end of July. Channel support is now in the 2395 area and a little low for that but there are a couple of alternate falling wedge support trendline options that could deliver a low close to that number.

When does this flag channel break? I'm leaning towards a lower low in my target area first but it could go either way and price will decide, likely today. A break up might well take the form of a gap up over flag channel resistance. We will see. SPX 60min chart:

There is important resistance just above at the daily middle band of course and that closed yesterday in the 2454.4 area. Bulls also need to break and convert that to support on a daily closing basis. I would also note that main rising wedge support from the February 2016 low is now in the 2380 area, and if SPX is heading back to falling channel support, then that would also be a decent match with the 61.8% fib retracement of the rising wedge from the March low in the 2385 area. SPX daily chart:

I'm taking a short holiday until Sunday when I will be returning for our monthly free public Chart Chat at theartofchart.net. That should be interesting and if you'd like to attend you can sign up for that on our September Free Webinars page. In the meantime ........

Compressing To Go Somewhere

After Tuesday's trend up day the obvious target for a retracement on ES was a backtest of the weekly pivot and we have been seeing that tested over the last two days, repeatedly. So far bears haven't managed to convert that to resistance, but they haven't stopped trying, and they may still succeed. ES Sep 60min chart:

This a particularly important test because the 5dma on SPX is now at 2438/9, and today is day three on the Three Day Rule. If bears can manage a daily close below that today then there would be a very high probability historically that the current retracement low would be retested in the near future. I have dozens of examples of this since the start of 2007 and the only two that didn't manage the full retest were very marginal higher lows while triangles were forming. SPX daily 5dma chart:

So what if bears can't convert weekly pivot to resistance? Well in that case I still have a falling channel on SPX (and on NDX, not shown today), and a fixed hourly RSI 14 buy signal to take SPX to the test of that channel resistance and the daily middle band, both now in the 2458 area. If the bears can break support and kill this setup then that would be an impressive show of strength for them. If they can't then this compression at support may deliver a break back over the daily middle band, and open a possible retest of the all time high. SPX 60min chart:

If we do see a break back over the daily middle band then that would need a confirming close above again tomorrow, but with the falling channel broken the odds at that stage would be heavily weighted towards the bulls to deliver that. SPX daily chart:

This is an interesting support test. If bears do manage to break and convert support to resistance then that would be a demonstration of strength more impressive than anything seen so far in 2017. If we see that then the odds favor a test of 2400 soon. If they fail then SPX may well be testing 2500 next instead.

Stan and I did our monthly free public Big Five webinar on AMZN, AAPL, FB, NFLX and TSLA at theartofchart.net yesterday after the close,and if you would like to see the recording then you can see that on our August Free Webinars page. I can't reach Stan at the moment but I believe that we are doing a free educational webinar an hour after the close tonight on 'planning trades like a pro'. This is the first and last webinar in our Managing Risk series and if you would like to see that you can register for that on our August Free Webinars page. This week's edition of The Weekly Call is posted and the model portfolio there is up 188% in the nine months to August 5th, 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.

Patriots And Tyrants

One of my favorite Thomas Jefferson quotes is that 'the tree of liberty must be refreshed from time to time with the blood of patriots and tyrants'. Among other things that's a reminder that all the powers of the state, however benign or harmless they may seem, are ultimately based on force and the threat of force, and every so often the use violent means is inevitable either to maintain, alter or curtail that power.

What's my point? Well markets are similar in the sense that any trend needs to be refreshed from time to time with the extraction of red ink either from those who challenge it, or those who defend it, sometimes both. In a downtrend that often involves a backtest of the daily middle band and it looks like we have another of those coming up shortly.

The SPX daily middle band is currently at 2461/2. A possible daily RSI 5 / NYMO buy signal is brewing and would likely fix on a decent break back over the middle band. SPX daily chart:

On the SPX hourly chart, a falling channel has been established from the high and SPX may well be returning to test channel resistance. That's currently in the mid 2460s, just over the daily middle band, and there is a fixed RSI 14 buy signal to help SPX the rest of the way. SPX 60min chart:

There's a similar setup on NDX, with another fixed RSI 14 buy signal and channel resistance currently in the 5915 area. NDX 60min chart:

On ES an asymmetric double bottom has broken up with a target in the 2460-2.5 area. ES Sep 60min chart:

The downtrend is being tested here and price will need to decide. A retest of the daily middle band is likely and rejection points lower. A confirmed break back above the daily middle band may well deliver a retest of the all time high.

Stan and I are doing our monthly free public Big Five webinar on AMZN, AAPL, FB, NFLX and TSLA at theartofchart.net an hour after the close tomorrow Wednesday 23rd August. If you would like to see that you can register on our August Free Webinars page. This week's edition of The Weekly Call is posted and the model portfolio there is up 188% in the nine months to August 5th, 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.

Bigger Dips

The daily middle band is a, and perhaps the, classic place for a bear move rally to fail, and after three days of failing to break above the SPX daily middle band this rally failed there into today's solid trend down day.

Since I capped the SPX chart below SPX has delivered a new retracement low. I'd like to see a move down to the 2405 area next to follow the path that I sketched in on the SPX chart at the end of July. Ideally SPX would then backtest 2450, possibly hitting the daily lower band at a lower level there, and then decline to the 2320 area, very possibly making the main retracement low there and setting up a solid dip buy opportunity into the end of the year. SPX daily chart:

NDX has now made a new retracement low as well and I still have a larger target back in the 5700 area from NQ, though I'll be watching the gap area not far above for possible support. NDX daily chart:

The ES, NQ and TF futures charts below were done an hour 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.

ES made the double top target I gave before the open this morning and kept going. Nice classic reversal. ES Sep 60min chart:

NQ made the double top target there and kept going. The new retracement low keeps open the 5710 target on NQ, though it isn't as strong a target as the H&S target on TF. NQ Sep 60min chart:

On TF the first H&S target at 1359 has been reached. The larger H&S target in the 1348 area should be reached soon. Might see a rally first. TF Sep 60min chart:

There's a lot of talk about the bearpocalypse starting here, but I see fibonacci pullbacks as a sign of a degree of market health. Personally I have made no changes to the proportion of my holdings invested in baked beans and bullets, and I would suggest that it's perhaps a little early to be gathering on mountain tops waiting for the end of all things. That said, I think the odds do favor more downside on equity indices in the next few weeks. :-)

Stan and I were doing our monthly free public Big Five webinar on AMZN, AAPL, FB, NFLX and TSLA at theartofchart.net an hour after the close today, but Stan is having major computer issues so we are delaying that until next Wednesday 23rd August. If you would like to see that you can register on our August Free Webinars page. This week's edition of The Weekly Call is posted and the model portfolio there is up 188% in the nine months to August 5th, 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.

Back On The Three Day Rule - Day Two

The decline into last week's low was slightly over 2%, so the break back over the 5dma, now at 2457/8 has put SPX back on the Three Day Rule. In the event of a daily close more than two handles below the 5dma today or tomorrow, then historically there would be a retest in the near future of last week's low at 2437. This is the highest probability historical stat that I watch. SPX daily 5dma chart:

So far the rally high is at the test of the daily middle band. That's not bullish ...... yet. On a confirmed break above the retest of the all time high opens and Stan would have an extension up to 2502 as the likely target. Obviously the daily middle band is a classic target area for a rally within a downtrend though, so a failure to break back above leans very bearish. SPX daily chart:

RUT hasn't even managed a backtest of the daily middle band, managing only a backtest of broken double top support. Again a classic rally target and fail there if RUT can't manage more. RUT daily chart:

The one ray of light for bulls here really is the hourly RSI 14 buy signal that fixed on Friday on RUT. It's not definitive, but it is suggesting more upside on RUT. If so there is strong double resistance at the 50dma and daily middle band at 1415-7. RUT 60min chart:

Overall this setup still favors the bears, but until we see that closing break back below the 5dma the bulls still have a decent shot. We'll see.

Stan and I are doing our monthly free public Big Five webinar on AMZN, AAPL, FB, NFLX and TSLA at theartofchart.net an hour after the close on Thursday, and if you would like to see that you can register on our August Free Webinars page. This week's edition of The Weekly Call is posted and the model portfolio there is up 188% in the nine months to August 5th, 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.

An Encouragingly Modest Rally

Yesterday's trend down day was a refreshing change of pace, and may well be the start of a decent decline, but the key is that a firm lid is kept on today's rally, and that there is follow through to the downside early next week.

A move like the move yesterday that breaks and closes well below the daily standard (two standard deviation) lower band often starts the strongest kind of daily lower band ride that trades between the 2sd and 3sd lower bands. To make that a likelihood here the 2sd lower band needed to be resistance today, and it has been so far. SPX daily chart:

All the daily and hourly sell signals made target yesterday except for the daily RSI 14 sell signal on NDX. Only one major support trendline was tested, and that was rising channel support from the early 2016 low on RUT. That hasn't broken yet and needs to break to open more downside. The rally from the low has been very modest on RUT so far, so any resumption of the downtrend would likely break that trendline quickly. RUT daily chart:

The ES, NQ and TF futures charts below were done an hour 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.

ES made the double bottom target at 2446.50 and that was pretty much the high today. That's encouraging for more downside on Monday. There is no open target below as the H&S target in the 2430 area was reached overnight. ES Sep 60min chart:

NQ made the double bottom target at 5823 and ran up a further twenty handles before reversing. There is a an open H&S target below in the 5705 area. NQ Sep 60min chart:

TF didn't quite reach the double bottom target at 1376, but missed by less than 0.5, so I'm counting that as close enough for government work. There is an open H&S target below at 1349. TF Sep 60min chart:

So far today this rally has been exactly what the doctor ordered to set the stage for continuation down next week. If seen the next decent target area on SPX is the 50% retrace level and possible H&S neckline in the 2405 area. A hit there would complete the first move on my July 29th possible retracement path projection sketched on my SPX daily chart at the top. Everyone have a great weekend :-)

Stan and I did our monthly free public Chart Chat at theartofchart.net on Sunday, and if you would like to see the recording that is posted on our August Free Webinars page. This week's edition of The Weekly Call is posted and the model portfolio there is up 188% in the nine months to August 5th, 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.

Rejection With Fire And Fury Such As The World Has Never Seen

From what I've been hearing on the news I'm assuming that this week is International Overblown Hyperbole Week so I have given a nod to that in the title today.

Back here on earth the trend down day today has cleared out some support levels and SPX may well be starting a daily lower band ride, though obviously that will need some follow through tomorrow.

I'll skip the futures charts today and expand on the index charts as it now seems likely that this much delayed pullback is at last getting started. If you would like to see the futures charts that I was looking at this morning they are on the my premarket video for Daily Video Service subscribers at theartofchart.net. I posted that on my twitter before the open and if you missed that then you can see it here. Other instruments covered in the video as well as ES, NQ & TF (covered at the start of the video) are CL, NG, GC, HG, DX, ZB, KC, SB, ZW, CC, EURUSD, GBPUSD, USDJPY, USDCAD, AUDUSD & NZDUSD.

SPX has now slightly broken below rising wedge support from the May low and the minimum target is the 38.2% fib retracement of that move at 2425. The obvious target, as I marked on this chart on 29th July, is the 50% retracement target at 2405 and the possible H&S neckline there. The hourly RSI 14 sell signal made target today. SPX 60min chart:

On the daily chart the RSI 5 / NYMO sell signal made target at the close today and SPX closed below both the 50dma and the 3sd daily lower band, though with the bollinger bands this compressed a hit of the 3sd lower band was to be expected on any decent decline. SPX daily chart:

On RUT the first IHS I have been looking at broke down with a target at a full retrace of the move up from the May low at 1351. Main support on the way at rising channel support in the 1377 area was broken at the lows today. RUT 60min chart:

On the daily chart the RSI 14 sell signal made target at the close today. RUT has reached the main support trendline at rising channel support from the Feb 2016 low. I'm expecting that to break but it might hold. This is a major support level test. RUT daily chart:

The obvious next target on NDX is rising megaphone support from the Nov 2016 low. That is now in the 5730 area, slightly higher than the H&S target I have on NQ in the 5710 area. That is a significant support trendline, though not as important as the support being tested on RUT here. On a break below the obvious next obvious target would be the possible H&S neckline in the 5575 area. The hourly RSI 14 sell signal made target at the lows today. NDX 60min chart:

On the daily chart NDX closed on the 3sd daily lower band and below the 50dma. The weak RSI 5 sell signal made target at the close and the only remaining sell signal on any of the daily or hourly charts on these three indices is the daily RSI 14 sell signal on NDX. NDX daily chart:

My working assumption is that this is the start of a larger move. Likely see a rally from here and if this is a strong lower band ride the 2sd lower band may start out being main resistance. That closed the day on SPX at 2451.

Stan and I did our monthly free public Chart Chat at theartofchart.net on Sunday, and if you would like to see the recording that is posted on our August Free Webinars page. This week's edition of The Weekly Call is posted and the model portfolio there is up 188% in the nine months to August 5th, 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.

Rejection

SPX spiked to a new all time high yesterday and then rejected hard from that high, and the lower highs at the same time on NDX and RUT. Today is about the bears following through on that rejection and the key objective for bears on SPX is to close the day below the daily middle band. If seen, that then needs to be confirmed with another close below tomorrow. SPX daily chart:

On RUT the high yesterday was at a test of the daily middle band, with a strong rejection there back into the lower band. RUT is testing the main possible H&S neckline, and there is some positive divergence suggesting that a right shoulder might form here. If so the ideal right shoulder high would be in the 1434 area. RUT daily chart:

However a slightly smaller H&S has already formed and broken down on RUT. If RUT doesn't reverse back up here the obvious targets below are smaller rising channel support in the 1378 area, then main rising channel support in the 1366-8 area, then the H&S target is at a full retracement back to the May low at 1351. RUT 60min chart:

The ES, NQ and TF futures charts below were done an hour 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 there is a possible H&S neckline at the late July low at 2457.25. That has almost been hit and ES could form a right shoulder here. If so the first resistance would be the weekly pivot at 2470.75, and the ideal right shoulder high shouldn't exceed 2480. ES Sep 60min chart:

On NQ the obvious next target is the late July low at 5844. NQ Sep 60min chart:

Overnight and this morning TF was testing the possible larger H&S neckline and important support area 1396-8. That has since broken slightly but not with conviction as yet. TF Sep 60min chart:

Bears have the upper hand short term here but need to use that to push through to the next support levels. A hard push down on SPX looks for the 2400-10 area.

Stan and I did our monthly free public Chart Chat at theartofchart.net on Sunday, and if you would like to see the recording that is posted on our August Free Webinars page. This week's edition of The Weekly Call is posted and the model portfolio there is up 188% in the nine months to August 5th, 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.

Slow Summer Friday

It has been a dull summer week, and of SPX, NDX and RUT, only RUT has managed a lower low this week. RUT has now made it, albeit rather lethargically, almost back to channel resistance, now in the 1416 area, and I've noted that this may be the right shoulder of an H&S pattern forming. RUT 60min chart:

SPX has been almost welded to the key 50 hour MA for much of the week. If we are to see it only a small move would be needed to retest the all time high, but Stan's read is that a break over 2480 would likely deliver a target in the 2504/5 area. SPX 60min chart:

The ES, NQ and TF futures charts below were done an hour 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.

Stan doesn't like this as an EW triangle but this is certainly a decent quality classical triangle and that broke up overnight. Key resistance is at 2477 and a break above opens the all time high retest and possible run to 2502. 2477 has seen two highs made there today so it is holding so far. A break below triangle support, now in the 2467 area, opens the downside. ES Sep 60min chart:

The triangle on NQ looks ok, and has not seriously threatened a test of triangle resistance today. Looking at the triangle structure this triangle leans bearish in my view, though the tape might need the help of a defibrillator to break out of the triangle. NQ Sep 60min chart:

The setup on TF is similar to RUT, other than the two channels are starting to diverge, with the retest of channel support on TF yesterday not quite mirrored on RUT. Both now have hourly RSI 14 buy signals fixed. TF Sep 60min chart:

It's been hard staying awake after 11am EST today, here's hoping the tape is more interesting next week. Everyone have a great weekend.

Stan and I are doing our monthly free public Chart Chat at theartofchart.net at 4pm EST on Sunday, and if you would like to see that you can register on our August Free Webinars page. Spaces are limited to 500 and already had over 350 registrations by yesterday's post, so I'd suggest registering sooner rather than later to be sure of a place. This week's edition of The Weekly Call is posted and 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.

The Year Of The Triangle

It has been a narrow range week on SPX, and for me the obvious read is that a triangle is forming on SPX/ES, with another possible triangle forming on NDX/NQ, and RUT/TF ploughing an independent furrow. I show the possible triangles on the ES and NQ charts below, though I'd note that Stan is not regarding this as high quality triangles.

RUT made the double top target at 1410 while SPX and NDX have been trading sideways. I'd note though the clear falling channels now established on both RUT and TF, and that buy signals are brewing on the hourly chart while the next obvious target within the falling channel is channel resistance, currently in the 1420/1 area. RUT 60min chart:

I was wondering about a possible all time high retest coming on SPX in my last post, and I'm still wondering about that. If we see a decent rally on TF here back into channel resistance then we might see that at the same time. SPX 60min chart:

The ES, NQ and TF futures charts below were done an hour 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.

I drew the possible triangle on ES last night with the note that it was hard for me to interpret the action yesterday in any other way than as part of a triangle. If this is a triangle then triangle resistance is currently in the 2473 area, and the 70% lean would be for a break up into a minimum target at a retest of the high. ES Sep 60min chart:

The triangle on NQ isn't as high quality, and the all time high is considerably further away, but we may be looking at a matching triangle here. NQ Sep 60min chart:

The falling channel on RUT is given added weight with the matching channel on TF. As the trading hours are significantly different this is a rarer event than most would think. TF Sep 60min chart:

SPX/ES and NDX/NQ have been compressing all week as RUT/TF has been making the first downside targets. The obvious next move from my perspective is a modest rally back into falling channel resistance on RUT/TF with an ATH retest on SPX/ES, and possibly on NDX/NQ as well. We'll see how that goes. If seen I'd expects the all time high retests to be part of topping patterns. There is still an open strong RSI5 / NYMO sell signal on the SPX daily chart.

Stan and I are doing our monthly free public Chart Chat at theartofchart.net at 4pm EST on Sunday, and if you would like to see that you can register on our August Free Webinars page. Spaces are limited to 500 and we already have over 350 registrations so if you are planning to attend, I'd suggest registering sooner rather than later to be sure of a place. This week's edition of The Weekly Call is posted and 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.

Quick Update

Just a quick update before I head out to dinner. 

The first trading day of the month generally leans strongly bullish, but as I mentioned on twitter last night, that's not the case in August, closing green about 33% historically and with SPX closing down five of the last six. 

ES has been trading mainly above the weekly pivot so far this week, but hasn't yet convincingly converted that to support yet. NQ and TF spent most of yesterday and all of today under their weekly pivots, and if ES/SPX retests the all time high to make the second high of a double top, that should be doable without either NQ or TF breaking back over their weekly pivots. I wouldn't be surprised to see that retest. 

Tomorrow and Thursday are cycle trend days, and if we are going to see the obvious next leg down, then it makes sense it would be then. 

On RUT the rising wedge has broken and broken double top support has been backtested perfectly. The double top target is at 1410. I'd note that an hourly RSI 5 buy signal has fixed and RUT needs to start the next leg down soon. RUT 60min chart: 

If SPX can convert the 50 hour MA to support then that opens the way for a possible all timed high retest. If seen I'd expect that to be the second high of a small double top that on a subsequent break down would look for the 2435 area. SPX 60min chart: 

AAPL is reporting earnings after the close tonight and if that delivers a retest of the all time high on AAPL that would improve the high there. 

Stan and I are doing our monthly free public Chart Chat at theartofchart.net at 4pm EST on Sunday, and if you would like to see that you can register on our August Free Webinars page. This week's edition of The Weekly Call is posted and 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.