Jack Chappell aka Springheel Jack - A Classical Trendline Chartist's View of Equities, Bonds, Forex and Commodities
- WE'RE JUST RANDOM SPECKS OF DUST IN A TORNADO TO THE MARKETS .......
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Stan and I did our end of year webinar yesterday looking at the outlook next year for equity markets including SPX, NDX, RUT, DAX & NIKK, also AMZN & AAPL, bonds, oil, gold, silver, gdx, us dollar, EURUSD, coffee, sugar, wheat, corn, bitcoin and a couple of other instruments we were asked about that I can't recall offhand. It is well worth watching and the recording is posted here. Our annual holiday sale on annual memberships also ends on Wednesday 2nd January and if you're interested, you can find the page for that here.
One of the things we were looking at was whether this current move down has been the first leg down in a bear market likely to extend well into 2019. Our feeling is that is most likely the case, but I was talking about the historical importance of the SPX monthly middle band in showing the nature of a move down. In the absence of something really unexpected SPX will break the monthly middle band, currently at 2651, with a lot of conviction at the close today and the last time that there was then a subsequent close significantly back over the middle band that didn't then deliver a new all time high before a lower low was in 1957, so that is the level that I'll be watching next year. If the monthly middle band is strong (monthly closing) resistance then we should see another leg down and we were talking about the targets for that. If SPX can deliver a closing break back over the monthly middle band then the odds will favor new all time highs, likely in 2019.
SPX monthly chart:
In the short term we are looking at the current move on SPX as a likely bear flag forming before at least a retest of the 2018 low. Ideally the high for this move would be in the 2550-70 area in the next week before a likely lower low with an ideal target at rising support from the 2011 low, currently in the 2300 area. After that we would be looking for a rally that should test the monthly middle band and either (preferred option) fail there into another leg down or break up into new all time highs. SPX 60min chart:
There is a very decent looking rising wedge forming on ES and I'm looking at the resistance trendline of that as key short term resistance on this rally. We could see a break down first to establish a less steep support trendline but if we see any sustained break below the weekly pivot at 2441 then I'd expect the low retest soon afterwards. ES Mar 60min chart:
Everyone have a great holiday tomorrow and a very Happy New Year in 2019 :-)
At the weekend in Chart Chat I was talking about the 2300-50 support area on SPX, and the current rally has started from there. That area is composed of the monthly lower band and the 200 week MA, both in the 2350 area, the 50 month MA at 2330, and rising megaphone support from the 2011 low now in the 2300 area. That is a formidable support area and, if broken, could open a direct move to the double top target area 2120-2200. If it holds that would be the obvious area to end the wave A move down from the high and start the wave B rally. If we see a retest of the lows after this rally ends then that could well be a double bottom setting up for the wave B rally. SPX weekly chart:
In the short term declining resistance from 2800 has been broken and SPX is consolidating above the 50 hour MA, currently at 2472. Obvious resistance above is at broken double top support at 2532, the annual pivot (until Monday close) at 2538, and the maximum level I am thinking this rally could reach, the daily middle band now at 2589 and declining at about ten handles per day. There is still an open hourly RSI 14 buy signal that is favoring at least somewhat higher. SPX 60min chart:
The short term pattern is unclear as yet but rising (likely bear flag) support is now in the 2415-20 area, with closer support at the 50 hour MA now at 2472. The 5dma is currently at 2444 and this is day three on the Three Day Rule, so a close below there today would be very bearish, but doesn't seem that likely at the moment. SPX 15min chart:
Once a year Stan and I do a free public Chart Chat at theartofchart.net looking at what might happen in the year ahead on the very wide range of indices, forex, cryptos, metals, and commodities that we cover. We are doing this years edition on Sunday and all are welcome. If you'd like to attend then you can register for that here. Just a reminder also that we are doing our holiday sale on annual subscriptions and that ends next week. If you'd like to take advantage of that the sale page is here. Everyone have a great weekend. :-)
After repeated tests where it held, the thrust down after the Fed hike on Wednesday broke down through the big support level and potential H&S neckline in the 2530-40 SPX area and continued down. Wednesday night I was looking at the next big level on ES 2465-80 area and that too has broken yesterday. I'd be surprised not to see a strong counter-trend rally on SPX soon but it's getting harder to identify where the next decent support might be.
Short term though, the ES low yesterday was an exact test of the possible falling channel support trendline that I had drawn in on my ES chart and, as long as that trendline remains unbroken, the obvious next target within the channel would be a test of channel resistance, currently in the 2570 area.
ES Mar 60min chart:
There are some things to bear in mind here on the bigger picture. Firstly, in the event that 2530-40 SPX was not going to be an H&S neckline, then the alternative was that it was double top support. That support has now broken down with alternate targets at either the 2200 area or the 2120 area, and my working assumption is one or both of those levels will be tested in 2019 as this move plays out. Large H&S patterns have now also broken down on both NDX and RUT, following the very high quality H&S on DAX which I've been watching form for much of the year and which broke down first.
I'd note possible support at rising megaphone support from the 2011 low is now in the 2300 area, and rising support from the 2009 low is now in the 2200 area, currently a decent match with that higher double top target. On a break below megaphone support in the 2300 area then I would be watching the 38.2% retracement of the move up from 2009 in the 2225 area, the 50% retracement of the megaphone in the 2000 area and the 61.8% retracement of the megaphone and the 50% retracement of the move up from 2009, both in the 1800 area. If we do see a decent rally start from the current area, which I'm thinking is likely, then an obvious target would be a backtest of the monthly middle band, now in the 2650 area. A weak rally would just be a backtest of broken double top support at 2532.
SPX monthly chart:
Stan and I are doing our annual free public webinar looking at the year ahead at 5pm EST on Sunday 30th December. All are welcome and if you'd like to attend you can register for that here. We will be looking at the usual very wide range of markets including equity indices, bonds, forex, precious metals and commodities.
Our usual end of year sale on annual subscriptions has started and as well as the usual free two months discount on these subscriptions there is a further two months (20%) off through to January 2nd. Our price guarantee as always is that as long as any subscription is continuous the price will never be raised on any product for any current subscriber. The sale code is XMAS 20 and the subscription page is here.
I'll be working next week so there will likely be another post out before then. Until then though, everyone have a great Xmas/holiday. :-)
Richard Chappell aka Springheel Jack has been writing about equity, bonds, forex and commodity market at channelsandpatterns.net since 2010, and also at theartofchart.net since 2015. He is co-founder of theartofchart.net, producing charts and videos every day for subscribers there, as well as numerous charts and videos for wider audiences.
SPX closed ten handles or so over the 5dma yesterday, so SPX is back on the Three Day Rule. If SPX should close back below the 5dma today or Monday then we should expect a retest of the last low at 2583.23 in the near future. At the moment the 5dma is at 2638 and SPX looks likely to close the day below it.
As it happens that would just confirm the bear flag rising wedge that has already broken down on ES with the same minimum target, so one way or the other that retest looks likely. At that point we could see the second low of a double bottom or continuation down towards the major support area below at 2530-40, the 2018 low and possible H&S neckline at 2532, and the annual pivot at 2538.
I had food poisoning for half of last week so I didn't manage to get a post out or remind everyone that Stan and I were doing our monthly public Chart Chat on Sunday. If you missed that the recording is posted here.
In the webinar yesterday we were looking at the likely triangle on ES/SPX and what would be likely to happen when that broke down, which it has with the move under 2600 this morning. What generally happens now is an initial break down, then a backtest back into the body of the triangle, likely in progress, and then a thrust down from the triangle, first working target mid to high 2400s though with very significant support at the annual pivot and 2018 low in the 2530-40 area where there is a possible large H&S neckline.
Full Premarket Video from theartofchart.net - Update on ES, NQ, SPX, NDX, RUT, CL, NG, GC, SI, HG, ZB, KC, SB, CC, ZW, ZC, ZS, DX:
At the open this morning there was a key common thread on SPX, NDX and RUT, in that all three were either close (SPX & NDX), or at (RUT) their key resistance trendlines from the all time highs. As I've been writing the falling channel resistance on SPX and falling wedge resistance on NDX have both broken, with RUT having already broken up earlier today.
What this means is that this move is entering a new phase, either setting retests of the all time highs or signalling retracement and consolidation before the next move down. The more obvious move is retracement and consolidation but we could see the high retests, and I'd note that the seasonality favors the bulls into late December, and that while all the hourly RSI 14 buy signals made target yesterday, the daily RSI 14 buy signals on SPX, NDX and RUT are still nowhere near target.
On NDX the obvious retracement targets would be one of the 50% or 61.8% targets in the 7070 or 7220 areas respectively. On SPX there is a potential bear flag channel here for which the obvious next target would be in the 2840-50 area, though it remains to be seen whether SPX can break back over strong resistance in the 2815 area. We shall see. In the the short term possible hourly sell signals are now brewing across the board, and the next step may well be to backtest this break up from yesterday morning.
SPX 60min chart:
NDX 60min chart:
Richard Chappell aka Springheel Jack has been writing about equity, bonds, forex and commodity market at channelsandpatterns.net since 2010, and also theartofchart.net since 2015. He is co-founder of theartofchart.net, producing charts and videos every day for subscribers there, as well as numerous charts and videos for wider audiences.
The bull scenario initially looked good after my post last week, with clear breaks back over the daily middle band and 5dma on Friday. That triggered the 5dma Three Day Rule, which on a daily close back below the 5dma on Mon day or Tuesday would look for a retest of the most recent low. SPX then broke back below the daily middle band and 5dma at the close on Monday, and retested the 2670 low on Tuesday.
Now I was saying last week that the alternate bear scenario would look for a retest of the main retracement low at 2603.54 SPX. We have not yet seen that full test, but after the current rally, it's likely that we will see that test. At that test SPX either finds support there on a marginal lower low, or extends lower to the 2018 low & annual pivot area 2530-40.
In the short term SPX is rallying on hourly RSI 14 and RSI 5 buy signals, and is trying to break up from a small double bottom. On a hard fail here SPX should return to retest yesterday's low, on a conversion of 2671 to support the double bottom target would be in the 2709 area, the falling channel resistance currently in the 2713 area, and important resistance on the way is at the 5dma now at 2693 (daily closing resistance only) and the 50 hour MA now at 2702.
At a fail either near here or at channel resistance the obvious next target would be a retest of the 2603 low, most likely on Friday or next Monday, and the next inflection point would be there. On a break and conversion of 2720 to support the next rally would have started unexpectedly early. Whether or not the likely low latest by the middle of next week was in the 2600 or 2530-40 area, I'd be expecting at least a sideways to up consolidation into Xmas, and if the low was in the 2530-40 area, then the ideal subsequent rally target would be a larger H&S right shoulder high in the 2870 area.
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Full Premarket Video from theartofchart.net - Update on ES, NQ, SPX, NDX, RUT, CL, NG, GC, SI, HG, ZB, KC, SB, CC, ZW, ZC, ZS, DX:
On my last post I was talking about the expected significant backtest on SPX, and we have now seen that retracement which has reached the 61.8% fib retrace area. At this point I'm expecting the main rally into Xmas to start in the next couple of days and that may well be starting here. However ........
I did mention in my last post that this retracement might extend lower into a full retest of the October low, and there is a possible setup to deliver that in this inflection point. That bear case rests on a decent quality H&S that has formed and broken down on ES with a target at that retest of the late October low, with a perfect backtest of the broken neckline in the 2717/8 area overnight. The original IHS on SPX looking for the 2910 has failed and this delivers a possible Janus Flag target at a retest of the prior low in the 2600 area. A sustained break below 2660 likely seals the deal for bears.
The bull case is that this is also what I would call a Janus Flag, in that it looks like a topping pattern that breaks down and rejects hard into the preceding high (2815 area). That case is backed up by the decent quality falling megaphone that has formed from the high and would obviously need some confirmation from breaks of upside resistance. The important upside levels on ES area possible double bottom support at 2718, and a sustained break above looks for the 2760 area. Falling megaphone resistance is in the 2730 area and a break above likely seals the deal for bulls.
Important resistance on SPX is at declining resistance in the 2720 area, the 5dma and the daily middle band, both in the 2726/7 area, with the 50 hour MA currently well above keys areas at 2757.
We are expecting a rally into Xmas to start shortly and there is a LOT of positive RSI divergence here over multiple timeframes, including the open daily RSI 14 buy signals that fixed on the last move up. The obvious path on the overall setup is a break up into that rally directly from here, but I'll be keeping an eye on the alternate bearish scenario which is a solid pattern setup as good as the bullish pattern setup but less likely due to other factors such as cycles. If the rally does start here then the obvious target area into Xmas for me would be in the 2850-2900 area. Whatever happens the next big target should either be a retest of the late October low or the November high. The odds of staying in the 2700 area are low.
Full Premarket Video from theartofchart.net - Update on ES, NQ, SPX, NDX, RUT, CL, NG, GC, SI, HG, ZB, KC, SB, CC, ZW, ZC, ZS, DX:
Last week I was talking about a backtest into the 5dma / 50 hour MA support area and we saw that, and another leg up over the daily middle band and the 50% retracement level that brings SPX up into resistance at the 61.8% retracement level at 2812 and the September rally high at 2816.94. I have a decent looking rising wedge from the low that has slightly overthrown wedge resistance and a lot of negative divergence on the 15min chart particularly. SPX 15min chart:
So what next? SPX is at significant resistance here, with the next level up over that resistance at the 50dma in the 2835 area. These are both significant resistance and either may well hold. I'd note though that if we were to see a serious break up over the 50dma, then I have marked up a possible IHS that has formed and broken up today with a target in the 2910 area. If SPX should spend any significant time over 2850, then that 2910 would be a credible target.
On the big picture we are likely soon to see a significant backtest on SPX, and that may extend lower into a full retest of the October low. If seen that may extend further into a retest of the 2018 low at 2532.69. Alternatively we might just see a partial retracement of the rally so far, and whichever way that goes we should then see a choppy sideways to up market into January. After that we should expect another big leg down and depending how that goes, 2019 may be a flat or red year like 2011 or 2015. SPX 60min chart:
The close on SPX yesterday was a clear close back over the 5dma, and as it has been a decline of more than 2% since the last break down, that puts SPX back on the Three Day Rule. That means that if SPX should deliver a clear close (4/5+ handles) back below the 5dma, currently at 2684, today or tomorrow, then SPX would very likely retest the October low in the following few days.
When SPX is trending in either direction I watch the 5dma and the 50 hour MA for trend support or resistance. The 50 hour MA is currently in the 2694 area, so that and the 50dma give us the short term support area.
On the resistance side there is a possible IHS neckline in the 2725 area, and that's still in play potentially if SPX breaks back under the 2685-95. That would have an ideal right shoulder low in the 2651/2 area, but in practical terms in the event of a daily close back under the 5dma SPX would likely deliver at least a new retracement low.
Higher resistance and a very possible target area for this rally if reached quickly are the 200dma and daily middle band, both currently at 2765, and the 50% retracement of the decline from the ATH in the 2772 area.
Our overall lean here is that we are expecting this rally to pull back shortly, very possibly into the 2680-2700 area, then go higher, very possibly into the 2760-70 area. SPX may well then fail into a new retracement low before the main rally begins. This current rally would therefore be what we would normally describe as 'the high before the low'.
It is possible though that the short term low may be in. I'd note that the daily stats lean bullish every day between now and FOMC next Wednesday, and there is already a possible asymmetric double bottom that has broken up with alternate targets in the 2785 and 2810 areas.
SPX daily 5dma chart:
SPX 60min chart:
Stan and I are doing our monthly free public Chart Chat on Sunday this week, and obviously that's likely to be an interesting edition. . If you'd like to attend, you can register our November Free Webinars page.
SPX retested the retracement low this morning, so the Three Day Rule target has been reached. This is a return to form after the first fail on this stat since the start of 2007 in April/May 2018. Still the strongest stat I follow. So what now?
From a cycles perspective there is a cycle high window in January, then a big cycle low in May 2019 at which we are thinking we should see the main low for this move. The ideal target for that low then would be a test of rising megaphone support from the 2011 low to be hit in the 2370 area, which would also be at the 50% retracement of the move up from the 2016 low. There are two very decent looking options for reversal on the way.
The first is in the the 2655-70 area, from where we could see a reversal to retest the high, to set up a double top looking for the main target area.
The other is a retest of the annual pivot and 2018 low area 2532-38, which is the obvious full retracement of the move from there and a possible large H&S neckline. If that H&S was to to form, with the right shoulder high ideally in the 2870 area in January, then on a break down the H&S target would be in the 2140 area, with a likely inflection point at rising support from the 2011 low where that would either hold and end the retracement there, or break to open up that full H&S target.
SPX weekly chart:
In the short term we are seeing a rally from this morning's low that should fail into at least a retest of that low. That fail should ideally be at or below declining resistance from the high, currently in the 2765-70 area. SPX 60min chart:
Stan and I are doing two free public webinars this week. The first is the Paragon Options webinar after the RTH close tomorrow at 5pm EST, delayed from 11th October, and on Thursday after the close we are doing our monthly webinar on the FAANG (+TSLA) and key sector ETFs. If you'd like to register either or both you can do that on our October Free Webinars page.
It has been a while since we have seen a Three Day Rule signal fix, in part because the rule requires an initial 2% decline, and those have been pretty rare over the last couple of years, but the Three Day Rule triggers when there has been a minimum 2% decline on SPX and then SPX closes back over the 5 day moving average. That is day one, and that happened on Tuesday. The rule looks at the next two days and if there is a close back below the 5dma on either day then the rule fixes. That close back below happened yesterday, on day three. On this statistic we could see a fairly marginal high over the current rally high this week, but whether we see that or not, SPX should retest the low at 2710 in the near future. The only exceptions to this rule since the start of 2007 were two instances when an overall triangle was forming, and rather than a full retest of the previous low there were marginal higher lows over that low in the next few days.
This is the highest probability stat that I follow, and SPX is very likely to retest the 2710 low in the next few days. SPX 5dma chart:
After that retest of 2710, what then? Well we could find support in that area or continue directly down towards the obvious bigger picture target in the 2500-50 area. We'll see when we get there. Stan is leaning 50/50 on that and I'm leaning 65/35 towards the downside targets. SPX weekly chart:
On the short term chart I'd love to see that higher high into the 50% retracement in the 2825 SPX area, but there was a significant failure this morning to convert the weekly pivot at 2790 SPX into short term support into a higher high, and SPX may head down directly from here. If we do see that marginal higher high, I'd expect that early next week, and it would be a very appealing short entry area. SPX 60min chart:
So why the title today? Well I just wanted to add that a 15% or 20% retracement of the kind that we may well be seeing here may feel like the apocalypse has arrived, but that's just because this has been such a long bull move. In truth a sharp retracement to the mean every so often is a sign of a healthy market, and it should be remembered that every retracement of any size on SPX historically has resolved to the upside. In the longer term the bulls always win. That doesn't apply on every market, tulip bulls have been waiting a while since the bottom fell out of that market in 1637, and they may be waiting a while longer, but US stocks aren't tulips. The reaper here isn't the herald of apocalypse, it's just the guy who mows the lawn.
I was saying after the SPX support trendline touch a few days ago that having a strong three-touch support trendline cuts both ways, in that it is strong support while it holds, but can get ugly fast when it breaks. The strength of this push down after the support trendline broke on Wednesday morning was extremely impressive.
That move may be bottoming out for the moment and, if so, that should be the end of wave A, with a wave B rally in progress now or soon, and a likely wave C down after that to complete this move from the high. There are a number of possible options for the wave C low, but my favorite would be a retest of the 2018 low at 2532.69, just under the annual pivot at 2538. There is a possible H&S neckline at that level. If SPX does a 50% retracement from the current low then the target would be in the 2825 area, though there is impressive looking resistance in the 2790 - 2800 area that may hold as resistance.
Full Premarket Video from theartofchart.net - Update on ES, NQ, SPX, NDX, RUT, CL, NG, GC, SI, HG, ZB, KC, SB, CC, ZW, ZC, ZS, DX, EURUSD, USDJPY, USDCAD, AUDUSD:
I was saying in our free monthly Chart Chat on Sunday that the obvious next downside target on SPX was main channel support, and a test of that trendline that would mean that the channel had likely evolved into a rising wedge, which is something that happens regularly. If you'd like to see the recording of that it is posted on our October Free Webinars page.
At the low yesterday SPX hit that rising support and held it, and hourly buy signals fixed across the board on SPX, NDX and RUT. That should be the start of a new leg up and, as long as that trendline support remains unbroken, the next target within the rising wedge is wedge resistance, due to reach the 2965-70 area by the time of the next high window in early November.
Full Premarket Video from theartofchart.net - Update on ES, NQ, SPX, NDX, RUT, CL, NG, GC, SI, HG, ZB, KC, SB, CC, ZW, ZC, ZS, DX, EURUSD, USDJPY, USDCAD, AUDUSD:
SPX 60min chart:
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On Thursday morning my SPX path that has held the last four weeks hit a serious pothole with the break below shorter term rising wedge support and a break back into the high 2800s. I've been looking carefully at the options from here and there are clear bull and bear scenarios. Price needs to give direction but until demonstrated otherwise I'm leaning towards the bullish option that SPX has another new ATH into what well then be a high that lasts well into 2019.
RUT has been leading the market, as is often the case and is testing the 200dma, which is holding so far. On a break below the next big support is rising support from the early 2016 low. A break below that would be a major technical break. RUT daily chart:
On SPX shorter term rising wedge support was broken and SPX came close to a test of main rising channel support at the low on Friday. At the moment the original upside targets in the high 2900s are still on the table, a full test of channel support likely cuts that to 2960ish, and a break below tells us that the high may already be in. I'd note that the first serious daily and weekly sell signals on the equity indices fixed last week, so the wind is at minimum already changing. SPX 60min chart:
We are doing our monthly free public Chart Chat today at 4pm EST, covering the usual very wide range of markets and instruments, and if you'd like to attend, you can register for that on our October Free Webinars page.
In my last post I was talking about the touch of the rising wedge support trendline that I'd been looking for, and the bull flag that was forming on SPX, that should break up today if not seen on Friday. SPX gapped up through flag resistance at the open today, and the minimum flag target is a retest of the all time high, not seen today but likely coming soon. On the video I was talking about a backtest, which we are watching now, and the ideal target for that would be a backtest of broken flag resistance, currently in the 2922 SPX area. The next possible target below would be a gapfill into Friday's close at 2913.98.
Partial Premarket Video from theartofchart.net - Update on ES, NQ, SPX, NDX, RUT:
I'm not showing the usual SPX hourly chart today because I was talking about the need to test rising wedge support for a couple of weeks before it was hit, and I wanted to show the clean trendlines on this pattern. This really is a beautifully formed rising wedge. The next target within the wedge, as long as wedge support is not broken first of course, is rising wedge resistance, currently in the 2975 area and rising of course. If hit, I'm expecting to see that in the next seven to ten days and that should deliver a significant high under main SPX trendline resistance from 2009, currently in the 3000 area. That main resistance trendline could be tested, but doesn't need to be. SPX 60min chart:
We are doing our monthly free public Chart Chat webinar on Sunday covering the usual very wide range of markets and instruments, and if you'd like to attend, you can register for that on our October Free Webinars page.
So far the scenario I was laying out on Friday has been playing out perfectly with the two red days at the start of this week, and SPX backtesting obvious trend support at the 50 hour MA twice. SPX didn't quite retest Monday's low yesterday, so the double bottom setup here isn't perfect but SPX may well resume the uptrend directly from here.
Full Premarket Video from theartofchart.net - Update on ES, NQ, CL, NG, GC, SI, HG, ZB, KC, SB, CC, ZW, ZC, ZS, DX, EURUSD, USDJPY, USDCAD, AUDUSD:
If SPX does go any lower, possibly on FOMC, then I'd note that gap support is at 2906/7 and rising wedge support and the daily middle band are both now at 2900 and, if tested, I'd expect support here. The historical stats for today and tomorrow are firmly bullish. SPX 60min chart:
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Looking at the average rises and falls on SPX from the start since 1997, the most bearish straight sequence of days of the year are the six days from 19th September through 25th September. Within those six days, usually including the September quadruple witching, the lowest percentage of positive closes is 23rd September at 26.67% and the highest is 25th September at 35.71%. Markets are closed on the 22nd and 23rd this year of course, so that leaves Monday and Tuesday next week leaning historically bearish, and Wednesday through Friday leaning an average of 62% bullish. There is a significant possibility of a retracement in the early part of next week, and there is a decent looking setup here for that.
Full Premarket Video from theartofchart.net - Update on ES, NQ, CL, NG, GC, SI, HG, ZB, KC, SB, CC, ZW, ZC, ZS, DX, EURUSD, USDJPY, USDCAD, AUDUSD:
So how well is the advance here correlating with the projection I posted three weeks ago? Very well so far, except the failure for the initial retracement to quite reach the ideal support trendline. That may still need to be tested, but looks ambitious for the first half of next week. If we see that retracement then the obvious target would be a test of the 50 hour moving average, currently in the 2910 area, and likely in that timeframe to be tested in the 2915-20 area. SPX 60min chart:
Since I was writing on Friday the bull flag megaphone has broken up, a rising wedge formed on ES into yesterday's high and then that wedge broke down with the obvious target at a retest of the retracement low. So far however this has delivered higher lows on SPX and ES, and ES is again testing key resistance at the weekly pivot at 2884. On a break and conversion of WP the obvious read would be that the next leg up has started, although .........
...... the ideal target on SPX has not yet been hit, though SPX has come close twice. There is a risk that is unfinished business below, and that the next leg up on SPX will not start in earnest until that target is hit. That leaves a question mark over any impulse directly up from here. If ES can convert 2884 to support today however, then we would likely not make that low today at least.
Apologies for the lack of updates this week. I've been reorganising my office which has been time-consuming though very satisfying. The video below is the full premarket video that I do every morning at for subscribers and there are quite a few charts at very interesting stages, most definitely including SPX/ES here.
When I was showing the SPX 15min chart in the video I was saying that ideally there would be an early rally today into the mid-2880s to test bull flag megaphone resistance, before a reversal back down towards bull flag megaphone support, now in the 2858 area. That trendline is declining at about 7.5 handles per day so will likely be in the 2854 area by the end of the session.
Full Premarket Video from theartofchart.net - Update on ES, NQ, CL, NG, GC, SI, HG, ZB, KC, SB, CC, ZW, ZC, ZS, DX, EURUSD, USDJPY, USDCAD, AUDUSD:
From the chart below you can see that is playing out as expected so far. SPX 15min chart:
On the bigger picture hourly chart that I posted last week with my ideal path for SPX over the next few weeks, you can see that my ideal retracement low target at a touch of rising support from the late June low is now in the mid to high 2850s and a strong match with the shorter term bull flag megaphone support shown on the 15min chart above. Ideally that would be tested today and the next leg up for the next three to five weeks would start there. We'll see how that goes. SPX 60min chart:
Two announcements today. We are doing our monthly free public Chart Chat this Sunday 9th September running through the usual 35 to 40 instruments over a very wide range of markets and, if you'd like to attend, you can register for that on our September Free Webinars page. Be there or be unaware! :-)
We are also running another Trading Academy Boot Camp starting on Monday September 10th. The first two were very well received, and you can see testimonials from that as you scroll down on our testimonials page. It is also cheaper (and at least in our view better) than anything comparable on the market, and likely to be the last one we run this year. At the moment there are still places available and, if you're interested in attending, you can find out more and register for that on this page here, though this is obviously the last chance to do so, as registrations for that will be closed before the first session on Monday.
SPX has made a possible short term high a couple of days ago, but needs to show us more on Tuesday than a retracement to test obvious support at the 50 hour MA, currently in the 2890 area. If that can be broken, and the open gap below it filled, then there is a decent shot here at seeing a retracement into rising support from the late June low, currently in the 2840 area, to confirm the rising wedge from there within the overall rising channel from the overall rising channel from the early May low.
This is the equity index section of my premarket video for this morning which talks more about the evolving setup here. Partial Premarket Video from theartofchart.net - Update on ES, NQ:
On the chart below I have drawn in an ideal path for SPX over the next few weeks into the significant high that we are expecting in late September / early October. This would be an ideal way to trade the next few weeks if it plays out this way. SPX 60min chart:
Some announcements today. We are doing our monthly free public Chart Chat on Sunday 9th September running through the usual 35 to 40 instruments over a very wide range of markets and, if you'd like to attend, you can register for that on our September Free Webinars page.
We are also running another Trading Academy Boot Camp soon and that is starting Monday September 10th. The first two were very well received, and you can see testimonials from that as you scroll down on our testimonials page. It is also cheaper (and at least in our view better) than anything comparable on the market, and likely to be the last one we run this year. At the moment there are still places available and, if you're interested in attending, you can find out more and register for that on this page here.
I'm posting my full premarket video from this morning, as this is a very interesting area on most of the instruments covered, with significant reversals in progress on many of them. Full Premarket Video from theartofchart.net - Update on ES, NQ, CL, NG, GC, SI, HG, ZB, KC, SB, CC, ZW, ZC, ZS, DX, EURUSD, USDJPY, USDCAD, AUDUSD:
In the short term we are looking for a short term high here and reversal into a low next week before another leg up. As I was saying on the video before the open, ideally that would set up with a modest retracement, as we have since seen so far today, then a retest of the current high to set up negative divergence on the hourly chart. Ideally that would happen today, and SPX would be retracing for the rest of the week. We'll see how that goes. If that doesn't happen I do have a possible alternate target in the 2925-30 area but that's the lower probability option.
RUT often leads on minor and major reversals, and on the chart below an hourly RSI 14 sell signal has already fixed. RUT 60min chart:
Some announcements today. We are doing our monthly free public Chart Chat on Sunday 9th September running through the usual 35 to 40 instruments over a very wide range of markets and, if you'd like to attend, you can register for that on our September Free Webinars page.
We are also running another Trading Academy Boot Camp soon and that is starting Monday September 10th. The first two were very well received, and you can see testimonials from that as you scroll down on our testimonials page. It is also cheaper (and at least in our view better) than anything comparable on the market, and likely to be the last one we run this year. At the moment there are still places available and, if you're interested in attending, you can find out more and register for that on this page here.
That was an unsatisfyingly fast low last week with none of the usual bottoming signals, but it was a higher low against the early August low, and the break under the daily middle band on Wednesday was firmly rejected on Thursday and confirmed on Friday, with a decent quality bull flag channel on ES breaking up on Friday, so that flag has a minimum target at a retest of the previous high at 2863.43 SPX, and that puts SPX within easy striking distance of the all time high at 2872.87.
Main support on SPX is at the daily middle band now at 2835, supported by the 50 hour MA now at 2837, and the new ES weekly pivot at 2837.
Full Premarket Video from theartofchart.net - Update on ES, NQ, CL, NG, GC, SI, HG, ZB, KC, SB, CC, ZW, ZC, ZS, DX, EURUSD, USDJPY, USDCAD, AUDUSD:
Apart from the possible rising wedge resistance on ES that I look at in the video, the possible rising wedge resistance now at 2879 SPX, and possible channel resistance would now by slightly over 2900. SPX 60min chart:
We are looking for a possible backtest of the 2780 area after the next high, leaning towards a 2880 area target for that. We are looking for a more significant high in September/October that should respect main trendline resistance now in the 2950-70 area.
Stan and Suz are doing a webinar on Thursday on Options For Income, our options premium capture service, which has been doing very well, and if you'd like to attend you can register for that on our August Free Webinars page.
I was saying on my twitter yesterday that if ES could break and convert to support weekly pivot at 2842 then ES/SPX could head up directly, but in the absence of that a test of 2800 area support was likely, and well, here we are. So what now?
Well there is decent established support in this area down to 2793 on ES, and that may hold. A break slightly lower gives a test of the monthly pivot at 2788. A break and conversion of monthly pivot to resistance would be a significant bearish break of a kind that we haven't yet seen in this retracement. ES Sep 60min chart:
Not far under the ES monthly pivot test is a very important trendline at current main rising channel support now in the 2770-5 area. A test and reversal there would mean that this rising channel has evolved into a rising wedge. A sustained break below would open more downside. SPX 60min chart:
I have to be out most of the rest of RTH today but I'll be watching with interest from my phone. If we find a low today then I'd note that Thursday and Friday this week are both cycle trend days, so we could see a strongly directional days tomorrow and/or Friday.
An unsettled open on ES last night with more rumblings from Turkey and lower lows on ES and NQ. I was asked before the open whether I thought there was a serious risk of the wheels coming off on SPX with a 5% or so retracement directly from here, and I replied that I thought that the risk was low, though possible as always.
There are four important support levels below, all shown on the SPX 60min chart. The first is the short term rising wedge support trendline at Friday's low, supported by the daily middle band. As long as that holds the obvious next target is wedge resistance in the 2870 area. If that should break then there is strong established support in the 2800 area, which would also be the 38.2% retracement of the rising wedge. If 2800 was to break that could be a significant bearish break, but there would still be main channel support, currently in the 2765 area.
On the upside resistance is at the the ES weekly pivot at 2842 and the 50 hour MA on SPX, currently at 2845 and resistance so far both on Friday and today, then the open gap from 2853.58 that would need to be filled. After that the way would be clear for SPX to head back to short term wedge resistance and a likely test of the all time high at 2872.87.
Leaning long into that ATH retest until demonstrated otherwise.
We did our monthly public Chart Chat yesterday, and the recording for that is posted on our August Free Webinars page. We are doing our monthly free public FAANG & Key Sectors webinar after the close on Thursday, and if you'd like to see that, you can register on the same page.
ES has been compressing for a couple of days now, forming a likely bull flag for the next leg higher. That may have made a low overnight or may have a bit lower to go before the next leg up begins. A break and conversion to support of the current short term high at 2863.75 ES should clear the path to the all time high retest. Partial Premarket Video from theartofchart.net - Update on ES, NQ:
On SPX main channel resistance is now in the 2888 area and may be the target for the next leg up, after which we expect to see a decent retracement with an obvious target at a test of main channel support, currently in the 2765 area but obviously rising.
After that we might see a test of longer term trendline resistance on SPX in the 2950-3000 area to make a more serious high. SPX 60min chart:
Some announcements today. We are doing our monthly free public Chart Chat on Sunday running through the usual 35 to 40 instruments over a very wide range of markets and, if you'd like to attend, you can register for that on our August Free Webinars page. We are also running another Trading Academy Boot Camp soon and that is starting September 4th. The first two were very well received and you can see testimonials from that as you scroll down on our testimonials page. If you're interested in attending you can find out more and register for that on this page here.
In the very short term though we are doing a free public webinar after the close tonight looking at trades on our directional options service Paragon Options, currently up about 12% after just under seven weeks so well on course for the minimum 60% per annum return that we are looking for. If you'd like to attend, you can also register for that on our August Free Webinars page.
I am back from holiday and normal updates are resuming today.
The retracement last week was larger than expected and established a larger rising channel from the 2691.99 low that is part of the larger overall rising channel from 2594.62. Shorter term channel support is now in the 2803 area, and I'm looking in the video below at a possible short term retracement to backtest the new weekly pivot at 2824 ES / 2825.5 SPX, support by the 50 hour MA currently at 2823 SPX. Ideally we would test and reverse there to start the main move to the retest of the all time high.
Full Premarket Video from theartofchart.net - Update on ES, NQ, CL, NG, GC, SI, HG, ZB, KC, SB, CC, ZW, ZC, ZS, DX, EURUSD, USDJPY, USDCAD, AUDUSD:
On the upside you can see that the two channel resistance trendlines will intersect in the 2890s later this week. That is a possible price and time target for this move. SPX 60min chart:
A couple of announcements today. We are doing our monthly free public Chart Chat on Sunday running through the usual 35 to 40 instruments over a very wide range of markets and, if you'd like to attend, you can register for that on our August Free Webinars page. We are also running another Trading Academy Boot Camp soon and that is starting September 4th. The first two were very well received and you can see testimonials from that as you scroll down on our testimonials page. If you're interested in attending you can find out more and register for that on this page here.
Sometimes as I cook with my older children we take a moment to discuss the great issues of our times and, after a quick foray this afternoon into the placebo effect and alternative medicines, my son and I decided to tackle the important matter of adapting Schrodinger's famous quantum physics experiment to fit the perspective of our labrador/poodle cross Pippa.
As Pippa's main and possibly only interest is in food, we decided to replace the cat with bacon, which would be placed in the same locked box with an atomic clock that, at the key random point of atomic decay, would now trigger a process that would perfectly grill the bacon. The bacon would therefore exist in a quantum probability cloud state of cooked/uncooked until the moment that the state was crystallised by Pippa's observation of the bacon, obviously through smell rather than sight.
This raised some interesting questions. Could Pippa influence the final state through her clear preference for cooked bacon? Would the odds of the bacon being cooked be affected by the aroma of cooked bacon being much more powerful than uncooked? Are there any real world materials that are truly impermeable to the aroma of cooked bacon? Good questions all, and doubtless physicists will be considering these in depth over coming decades. As our initiation of this great project is now complete, my son and I are thinking of looking at world peace tomorrow. :-)
On to the markets, where ES/SPX has been backtesting the resistance broken on the announcement later yesterday that Trump and Juncker had agreed on a trade deal to avoid mutually higher tariffs. The low for that backtest may already be in and we are leaning long in the expectation of seeing the all time highs on SPX retested in the next few days.
I was saying in my last post that the closer SPX came to the retest of the all time high (ATH), the more likely it would be that the retest would happen before a significant retracement rather than afterwards. At this stage the main pattern from the lows this year is the rising channel that is the thrust up from the lows on the bullish triangle that formed from the 2018 highs. The minimum target for that bull triangle/flag is the ATH retest and you can see on the chart below that the ATH and rising channel resistance will cross at the close tomorrow. The ATH retest doesn't need to be then, but is likely to happen in the first half of next week, and from there we should see the decent retracement that we didn't see last week, possibly back into the 2800 area, before likely continuation higher. Any retracement on the way into that ATH retest is now likely both to be modest, and to be a buying opportunity.
SPX 60min chart:
A couple of announcements to make today. The first is that our new directional options service Paragon Options finished the first month of trading with a respectable 5.43% profit on the $100k model portfolio, slightly more than 15% return on margin employed. We're expecting to average returns of at least 5% monthly in future and, if you're interested in a 30 day free trial, you can sign up for one of those here. Over 90% of those who took a free trial a month ago have converted to being monthly subscribers at the end of their trials. The second announcement is that I'm sort of on holiday next week as I'm taking a one week course learning ancient greek with my daughter. I'll try and get a post out next week but it may not be possible depending on time constraints.
Last week I was looking at the high quality setup for a retracement but was looking for a modest move to the all time high retest on RUT before that got going. Today we are looking at SPX having gone considerably higher and at the time of writing RUT has still not delivered that full retest, though it came close at the high this morning. I did mention that the correlation between SPX and RUT tended to be rather variable.
Full Premarket Video from theartofchart.net - Update on ES, NQ, CL, NG, GC, SI, HG, ZB, KC, SB, CC, ZW, ZC, ZS, DX, EURUSD, USDJPY, USDCAD, AUDUSD:
There are still high quality daily and hourly sell signals fixed on SPX, and that still favors retracement here short term. It's important to remember though that on the bigger picture here SPX is in a thrust up from a triangle with a very clear target at a retest of the all time high at 2872.87, and the closer SPX gets to that target without retracing, the more likely it is that target will be hit before a significant retracement is seen. If we don't see that retracement start today, SPX may well just head there directly. SPX 60min chart:
I was talking about on Tuesday about the likely short term high forming here and that process is now further advanced and possibly finished, though I think that the odds favor another short term high retest before the retracement that should follow.
Just to recap, we are expecting a short term retracement retracement to follow, lasting perhaps a week and taking SPX back into the 2750-70 range before another leg up starts that might carry SPX up to the all time high retest.
In the short term an hourly RSI 14 sell signal has now fixed and a daily RSI 5 sell signal is brewing. Key short term trend support is at the 50 hour MA, currently in the 2798 area, and if we see a high retest from here I'd expect that to be the second high of a small double top. SPX 60min chart:
Why am I looking for a short term high retest? Well there is the lack of a decent initial reversal pattern but there is also the setup on the RUT chart below with a clear bull flag wedge having broken up with a minimum target at the ATH retest not far above. That isn't a huge move but this is a reliable pattern and I'm expecting this to deliver. While the correlation between SPX and RUT is somewhat variable, a short term high retest on SPX is the obvious thing to see while this plays out on RUT. We'll see whether that delivers. Any sustained break below 2800 SPX would obviously throw this into serious doubt. RUT 60min chart:
Stan and I are doing our monthly free public webinar on the Big Five and Key Sectors an hour after the close tonight. This is looking at AAPL, AMZN, GOOG, FB, NFLX, TSLA & IBB, IYR, XLE, XLF, XLK, XRT. If you'd like to attend you can register for that on our July Free Webinars page.
I was expecting a modest retracement in my last post and we have seen one. I was looking at the setup on the premarket video today and there is a probable short term low here testing support at the ES weekly pivot, open gap support on SPX and the 50 hour MA. We should see a short term higher high next and that will likely be setting up a larger retracement to follow. That's working out so far.
On the bigger picture there are possible hourly RSI 14 and daily RSI 5 sell signals brewing and those I am expecting to deliver not too soon after a higher high for July is made on SPX. SPX 60min chart:
SPX has now broken above both the June and March highs, and should be on the way back to retest the all time high. Short term though we are looking for a modest retracement before the next leg up. The short term ES channel support that I was looking at in the premarket video has now broken, the overnight high is being retested and there is a lot of negative RSI divergence. This retracement should be starting soon and last into the first half of next week. Partial Premarket Video from theartofchart.net - Update on ES, NQ:
On the bigger picture SPX is within a larger rising channel and channel support is currently in the 2716 area. That shouldn't be a target here. SPX 60min chart:
My apologies for the intermittent posts lately. As some of you will know, it has been very busy at theartofchart.net recently with the launch of a major new service for us on 25th June, Paragon Options, a directional options service trading options on futures. We've put a lot of work into developing and launching this service, which as far as we are aware is entirely unique, trading options on the wide range of futures and forex instruments we cover in our other services. Almost all or all other options services focus on stocks and ETFs. The first month is going well, up about 5% in the first two weeks and two days so far, and workload should be easing off a bit soon, but it has been very busy. My posting schedule should be back to normal soon.
Since I last posted that the retracement low was likely in, SPX formed a decent quality IHS and that has broken up and reached target at a retest of the June high. In the short term ES/SPX is retracing and ideally we'd like to see a low made today or tomorrow in the 2760-5 ES area before this uptrend resumes.
Full Premarket Video from theartofchart.net - Update on ES, NQ, CL, NG, GC, SI, HG, ZB, KC, SB, CC, ZW, ZC, ZS, DX, EURUSD, USDJPY, USDCAD, AUDUSD:
On SPX there is a clear rising channel from the low and it is this I am mainly watching here. Channel resistance is rising obviously and is currently in the 2842 area. SPX 60min chart:
We are doing our monthly free public Chart Chat on Sunday. If you'd like to attend you can sign up for that on our July Free Webinars page.
SPX reached the ideal 2680-2700 retracement low range and has rallied strongly from there with a 60min RSI 14 buy signal fixing this morning. The low isn't definitely in yet, with resistance at the 50 hour MA and daily middle band above in the 2737 and 2756 areas respectively, but this is a very strong candidate low, but a decent double bottom setup here meaning that there would be no need to retest the low as part of a bottoming process. We'll see how that goes.
Partial Premarket Video from theartofchart.net - Update on ES, NQ, SPX, NDX, RUT:
The cleanest reversal setup is on NDX, with a falling wedge / bull flag that broke up this morning, another hourly RSI 14 buy signal fixed this morning and a double bottom setup to point the way back to the high retest that would also be the minimum bull flag setup. Any retracement today will look like a buy to me. You might still be reluctant to be long yet subject to more confirmation, but this isn't a setup that I'd be at all keen to short. NDX 60min chart:
The weather is nice here in the UK for once. There's a strange yellow ball in the sky which I understand from google is called a 'sun'. Not a common sight in the UK at all so I'll be cautiously investigating this phenomenon over the next few days. Everyone have a great weekend! :-)
