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 .......
- CHARTISTS MUST PUT ALL BIAS ASIDE AND LET THE CHARTS DO THE TALKING OR WE'LL SEE ONLY WHAT WE WANT TO SEE - This blog has a copy of all header posts that I publish anywhere, so that those interested in seeing what my thoughts are on the markets can find them easily.
- I will be answering questions and responding to comments, so feel free to respond to any posts and I will see your comment even if it is not on the most recent post.
- If you're interested in seeing any intraday charts I post, I do that on twitter, and my twitter handle is @shjackcharts.
- The charts in the posts are as large as I can practically make them. if you would like to look at one more closely, click on it, and the link will take you to a larger version at screencast. If you click on that again, you will get a full page version, and can use the resizing function on your browser to enlarge parts of interest further.
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:
