Island Top on SPX

Well obviously SPX didn't do the higher high that I would have preferred, and this morning's gap down broke down through rising wedge support and also gapped back through the open breakaway gap up from 2839.25. This currently leaves a decent quality island top on SPX and an open breakaway gap down from 2853.53 that I wouldn't expect to see filled until the current decline is finished.

No clear reversal pattern yet, though there is a poor to medium quality H&S option that I have marked on the chart below. The minimum targets I would generally be looking for on a break of a rising wedge like this are the 38.2% or 50% retracement targets in the 2797 or 2773 areas respectively. SPX 60min chart:

Are there any important support levels that didn't break this morning? Yes, rising wedge support on TF has been tested but not yet broken, and there is a possible 60min buy signal brewing there that I'm watching with interest. I'm not expecting a strong reversal to start here but this does give the bulls a potential opening. We'll see. TF Mar 60min chart:

Non-Verbal Communication

I had an interesting question on my twitter that I answered this morning, and it was in response to my tweet at the open on Friday saying that both ES and NQ had formed clear bullish triangles and that I was expecting ATH retests on both. The question was from later in the day when the ATH retests had been done and both indices continued up in a trend day. The question was why the outlook had changed, and my reply this morning was to point out that I had tweeted that I was expecting the retests, but that I had never added that ES and NQ would reverse there. The outlook had not therefore changed. I had expanded on that in Friday's intraday video before the main move up, but there's only so much you can put into a tweet. What was interesting about the question is how people read beyond what is actually said. Something I see regularly.

The question today is whether we are seeing an inside day before a higher high (preferred option), or whether the triangle thrust has already ended. The dividing line on ES for me is the break and conversion of the new weekly pivot at 2851. If that turns resistance then ES likely continues down. In this context these triangles are likely termination patterns, so the obvious move after the triangle thrusts end is to deliver a retracement so large that it can be seen with the naked eye. It's been a while since we saw one of those, so that would certainly be an interesting change of pace. Intraday Video from theartofchart.net - Update on ES, NQ and TF:

How does this setup look on SPX? Well the first thing to note is that trendline resistance on SPX was hit at the high on Friday, and that may mean that trendline support, currently in the 2848 area needs to be tested before any higher high. That would mean a test of the ES weekly pivot if seen today or earlyish tomorrow. The bull/bear line on SPX is a little lower though, with that trendline support first, but clear backup support at the open breakaway gap from 2839.25. If that gap gets filled then the triangle thrust will have been fully retraced and, if these triangles were termination patterns (usually but not always), then a significant swing high should be in. SPX 60min chart:

Stan and I are doing our free monthly Chart Chat on Sunday at theartofchart.net. We'll be covering the usual wide range of instruments and you can register for that on our February Free Webinars page. If you aren't already watching The Weekly Call regularly then you can see this week's edition here. That's now up 296% trading futures since October 2016 and is free. If you trade futures you should really think about following that. That's updated once a week and you can either go to our blog to find that here, or take the update link from my twitter every Monday morning.

... And To Finish Monsieur, A Wafer Thin Triangle

I said on my twitter this morning near the open that both ES and NQ had formed bullish triangles that should at minimum deliver full retests of the all time highs on both in the near future. ES did a new all time high this morning and NQ has now scraped a new ATH by a tick this afternoon. Those are the minimum targets made and we could see a reversal here, though obviously we may not, and historically even if we do, significant declines on Friday afternoons are a rarity.

I have a quick look at how these triangles tend to behave on the video below and would also note that these triangle thrusts tend to be termination moves, and if that is the case here, then after the triangle thrust is retraced, ES and NQ are likely to continue down into what might at least be a retracement that lasts more than a day. Who knows, or dares to dream, or can even remember what such a retracement might look like? :-)

Intraday Video from theartofchart.net - Update on ES, NQ and TF:

If NQ was to reverse here there is a beautiful possible double top setup that on a sustained break below 6888 would look for the 6770 area. NQ Mar 60min chart:

Everyone have a great weekend. :-)

Watching the SPX Rising Wedge

I posted my premarket video today as I haven't done that in a while, and in part that's because I'm not well and trying to protect my voice today, so it makes sense not to do an intraday video today.

The analysis of equity indices is at the start of the video and I've left in the other sixteen instruments I cover every morning in these premarket videos at theartofchart.net. If you're interested, there are interesting things happening on DX & USD pairs, CL, GC, ZB & HG particularly.

Premarket Video - Update on ES, NQ, TF, and CL, NG, HG, GC, ZB, DX, EURUSD, GBPUSD, USDJPY, USDCAD, AUDUSD, NZDUSD, KC, SB, CC & ZW:

I haven't been showing enough SPX charts recently, so here is what the rising wedge looks like on the SPX chart. Forming nicely, and wedge support is now in the 2831 area. Wedge resistance is now in the 2862 area, and would be the obvious next target if wedge doesn't doesn't break first. 60min RSI 14 sell signal fixed and I'm leaning towards at least a retest of the ATH even if SPX is topping out short term. SPX 60min chart:

The Pig That Flew

ES made a higher high this morning, slightly overthrowing wedge resistance, which could need to be slightly redrawn, and then rejected into a test of wedge support, reversing back up there exactly. That has delivered the move I was looking for yesterday, but if we are really seeing something significant change, then there will need to be a round two. The characteristic bear fail in 2017 was to do the first decline in a sequence, and then resume the uptrend without delivering a follow-up. The next test is to see whether that happens again here. The NQ chart is encouraging there, as the NQ rising wedge broke support at the LOD, and that would generally follow through. Intraday Video - Update on ES, NQ and TF:

In the short term ES is either putting in the right shoulder on an H&S that would look for the 2795 area on a sustained break below 2825, or is breaking up from a small IHS with a target at a retest of the ATH. At the time of writing ES still in that inflection area. ES Mar 60min chart:

The Temporary Oxymoron

ES hit my preferred resistance trendline overnight and then again at the high this morning. There are now high quality rising wedges on ES, NQ and TF and, strange as it seems to use these words in this sequence, this is the nicest short term bear setup that I've seen in months. Looked at in detail on the video below. Intraday Video - Update on ES, NQ and TF:

How far does this bear setup extend? Well rising wedge support on ES is now in the 2816 area and this setup may only be good for a test of that trendline so we'll see. ES Mar 60min chart:

Onwards and Upwards

I tend to look at any bear setups lately with a very sceptical eye, and the nice looking nested double top setups on ES and NQ that last week closed with didn't long survive the start of trading this morning. I posted on my twitter before the open that there was a high quality support trendline on ES in the 2805 area that would need to be broken to open the possibility of further downside, and that was not broken. In my look at ES in today's intraday video I am looking at two possible matching resistance trendlines, currently in the 2833 and 2840 areas, but rising of course. Intraday Video - Update on ES, NQ and TF:

I often watch RUT/TF for guidance as to where equities are in a trend and that is still looking reassuringly boring, though that's very much a relative word talking about an index currently close to a P/E of 140. RUT/TF is currently reaching the high retest that I was looking for after Tuesday's sharp decline, and that could be the second high of a modest double top. TF Mar 60min chart:

Some Writing On A Wall Somewhere

Well it's been a while but something interesting finally happened on equities today with an AM high that died into a halfway decent decline. Rising support on SPX from the late December low was broken and we may well now be in the topping process for a larger retracement before subsequent higher highs.

This one is mainly interesting because if seen this should deliver a decent buyable dip, but that would be interesting to see. The high after that dip might be more interesting for a swing trade. Intraday Video - Update on ES, NQ and TF + others:

It's a measure of how strong this move up has been that a 40 handle pullback failed to reach the 50 hour MA on SPX, now at 2756. If this move is topping out, the obvious topping sequence would be a retest of the high and marginal new ATH before a move to test rising support from the November low, currently in the 2712 area. SPX 60min chart:

I've posted my full intraday video as I aim to do that once a week. Normally I'll just be posting the equity index section. 

Happy vs Mambo #5

I hope everyone is looking forward to the holiday weekend. I know I am, and I am planning to celebrate on Monday by moving a particularly large wardrobe from my daughter's bedroom, and replacing it with a rather nice antique desk. Life can get pretty wild at Jack's house. :-)

I was talking about rising wedge resistance on ES yesterday and that trendline has been reached and overthrown today. NQ has reached a decent quality rising wedge resistance trendline as well and TF may have topped out already. We may well see a reversal here, though whether it lasts more than the usual day or two is another matter. Personally I'll be regarding equity indices as possibly being in a two way market again only after we see a 5% pullback, and I'm aware that could take a while longer.

Intraday Video - Update on ES, NQ and TF:

Regardless of any retracement here, Stan and I would be expecting higher highs afterwards. The SPX daily chart SPX daily chart:

I'll leave you with a very funny mashup video that I found this week to start the holiday weekend:

Resistance Trendlines

The little retracement yesterday made the targets on the 60min sell signals on ES and NQ, and denied SPX a record on the number of consecutive all time highs at the start of a year. However it is likely that in a week or so SPX will complete the longest ever period without a 5% retracement.

A decent three touch resistance trendline was established on ES on Monday, and I was looking for yesterday's retracement to establish a corresponding support trendline. That is now done and I have a working rising wedge on ES with wedge resistance now at 2775 if ES can clear Stan's resistance in the 2775 area. NQ and TF both also looking interesting and I cover all three in the video.

Intraday Video - Update on ES, NQ and TF:

Here is the rising wedge, and it's a decent pattern. We'll see how it does. Rising wedge support is now at 2749. ES Mar 60min chart:

Stan and I are doing a free educational webinar an hour after the close tonight at the theartofchart.net looking at translating technical analysis into profitable trades. If you'd like to attend you can register for that here.

A Polite Cough

I've been ill or recovering much of the new year so far, as has Stan, and much of the western world as far as I can tell, and I've managed to keep up with my main work at theartofchart.net but this is an unusually late first post for the year.

That's not the polite cough that I'm referring to in the title though. SPX and ES have been on both daily RSI 14 and RSI 5 sell signals since the end of 2017 and a polite cough to the upside would at this stage be all that is required to kill the underlying RSI divergences and fail those signals. We may well see that happen today, though there is at least some reason to think that bears might be able to pull off a last minute decline to save them from that failure today.

I look at that in my premarket video this morning, though with the observation that it's not a trade I'm taking. I've included the whole video today so if you're interested you can see which other trades I do think are interesting, notably CL and KC today, and managing existing trades in ZB and NG. The part on equity indices is covered in the first five minutes. Premarket Video - Update on ES, NQ and TF:

To fail the daily sell signals requires the respective RSIs to close the day above the initial RSI spike used in the signal. As you can see, SPX is very close to managing that. SPX daily chart:

I won't be holding my breath waiting for a decline in equity indices today but you never know. If we do see a decline Stan and I are still looking higher afterwards.