A Short But Winding Road

 In my premarket video this morning at theartofchart.net this morning I was looking at the very attractive looking setup on the index futures for a sharp retracement, and since then an H&S has broken down that would look for the 4165 area on ES. That would be a backtest of the daily middle band as support, and as I was explaining looking at the ES chart particularly, this retracement may well go deeper towards the 4100 area.

My premarket video at theartofchart.net:

On the SPX 5min chart the current move has formed a high quality small rising wedge that has broken down and backtested broken support. A small H&S has broken down looking for the 4177-80 area. That would be only a 23.6% retracement which would be unusually modest. Generally I would be looking for the 4120 - 4155 area in the 38.2% - 61.8% retracement range.

SPX 5min chart:

On the bigger picture this current move is a break up from a triangle. Ideally we would see a backtest back into the body of the triangle, ideally in the 4100 area, though the move does not need to go that deep. The pattern on ES is suggesting that may be the target area though.

SPX 15min chart:

On the rising wedge from the March 2020 low any retracement would need to hold wedge support, currently in the 4070 area, and the obvious next target within the wedge would be the wedge resistance trendline just under 4300.

SPX 60min chart:

On the daily chart for SPX, as well as NDX and INDU, there are open daily RSI 14 sell signals that I'm expecting to make target after this current move up has played out, and daily middle band support at 4167 will have to be broken and converted if the retracement target is lower than that. Support at the hourly 50MA is in the same area, so that is an strong level.

SPX daily chart:

If seen, a decent retracement here is likely setting up a run to retest the all time high on SPX and then very possibly to run up into rising wedge resistance just currently under 4300. If seen I'll be looking for resistance there.

Candidate Retracement Low

 In my last post on Tuesday I listed the three obvious targets for the current retracement from the all time high on SPX. The highest was the rising support trendline from the March 2020 low and that target was hit at the low yesterday. So far that has delivered a large rally and may well be the retracement low.

If so, then that confirms a rising wedge from the March 2020 low and delivers a clear target for the move of that low at rising wedge resistance, currently in the 3287 area, but rising of course. Possible resistance at the current all time high, but no particularly obvious reason to think that resistance would be found there.

SPX 60min 16Mo chart:

In the short term declining resistance from the all time high has been broken, SPX has broken back over the 50 hour moving average, 5dma and weekly pivot and is consolidating before a likely move higher.

SPX 15min chart:

There is still one strong resistance level that still needs to be broken to clear the way for a retest of the all time high, and that is the daily middle band, tested at the high so far today and holding so far, even though it seems likely to be broken.

If that doesn't break today then tomorrow is a Friday, and Friday's have been very bullish in recent months. Some exceptions to that but not many. Ideally for bulls SPX would close above the daily middle band today, currently at 4167 SPX, and then confirm the break back above with another close above it tomorrow.

SPX daily chart:

I've never been much for looking back at nice calls made in the past, as it seems like boasting, but I understand that it is actually called marketing and that I should try to do it regularly.

That being the case this is a lovely Bitcoin/USD daily chart I was talking about in the Chart Chat last Sunday at theartofchart.net. I noted the H&S that had just broken down and had the target marked in just under 30,000.

Bitcoin Daily chart (16th May):

The low yesterday on BTCUSD was 29,925, just a little shy of the target marked but very close, and a strong rally started there. Definitely the sweetest call of the week, though I'm pretty happy with the SPX trendline hit yesterday as well of course.

Bitcoin Daily chart:

There are two free public webinars at theartofchart.net this week and the first is our 'Big 5 - FAANG Stocks and Key Sectors' webinar an hour after the RTH close today, and our 'Trading Commodities - Setups and Approaches' webinar an hour after the close tomorrow. If you'd like to attend either or both you can sign up for those here and here respectively.

Bull Flag And Retest (Reprise)

 Since my last post we have seen what may be the full backtest on SPX that I was looking at then, but might only be the first leg of that backtest.

The backtest did not quite reach the 3950-4025 target zone, and none of the three obvious targets were hit at the weekly middle band, currently in the 3980 area, or either of the rising support trendlines from the March 2020 and October 2020 lows (shown below), and the daily RSI 14 sell signal did not make target so I'm leaning towards another leg down, that could happen after an all time high retest to set up a possible double top.

SPX daily chart:

The main rising support trendline is the one from the March 2020 low, but that is in the 4050 area, higher than the target zone in the 3950-4025 area. Possible support if hit.

SPX 60min 15Mo chart:

Rising support from the October low is now in the 4025 area.

SPX 60min 9Mo:

In the short term I did an intraday video at theartofchart.net today looking at the short term bull flag channel on SPX. Channel support doesn't necessarily need to be reached before that breaks up, but that's been the pattern that SPX has been trading within today so far.

SPX 5min chart:

Bigger picture I am wondering about a possible all time high retest coming next, and then a move into the ideal backtest area as that pattern breaks down, at which point the double top could either make target (3870 area), which would be a serious support break, or fails and rejects back up into the all time highs, at which point the 4000 area would have been converted into support.

There are two free public webinars at theartofchart.net this week and the first is our 'Big 5 - FAANG Stocks and Key Sectors' webinar and hour after the RTH close on Thursday 20th May, and our 'Trading Commodities - Setups and Approaches' webinar an hour after the close on Friday 21st May. If you'd like to attend either or both you can sign up for those here and here respectively.

Backtesting Broken Resistance

 On the bigger picture here the overall position on SPX is bullish. There has been a solid break over the big resistance level at 4000, and SPX is currently on both monthly and weekly upper band rides. There is currently no negative divergence on either of the monthly or weekly charts, with the weekly RSI 5 sell signal that had fixed having failed.

SPX monthly chart:

The last serious retracement found support at the weekly middle band and that is now at 3934 and rising. Until that breaks and converts to resistance there's not a lot happening on the bear side.

SPX weekly chart:

However, after a break over a big resistance level there is very often a backtest, and the setup for that has been shaping up nicely. Both RSI 14 and RSI 5 daily sell signals have now fixed on SPX and the setup here is favoring topping patterns forming to deliver that backtest. Ideally that would be into the 3950 - 4025 range. Any lower would be a possible main support break.

This week there have been two tests of the daily middle band that have held on a daily close basis so far. That's now at 4166 and needs to break on a daily close basis to open the downside.

SPX daily chart:

In terms of topping patterns there is a promising looking possible H&S forming and on a sustained break below the monthly pivot at 4131 the H&S target would be in the 4025 area. That is a very real contender unless SPX breaks and converts the weekly pivot at 4192 to support, in which case I'd expect to see a high retest. There's a very decent looking H&S setup on RUT/IWM as well, and a possible large double top on NDX.

SPX 60min chart:

There may not be a high retest though, as the last outstanding upside target on the indices was reached yesterday when the Dow triangle made target at a retest of the high there. That means that there is now also a possible RSI 14 sell signal brewing on Dow. 

I've done two intraday webinars for subscribers at theartofchart.net this week looking at this Dow triangle and calling the next likely market moves on SPX with it. That's interesting from a pattern perspective and if you'd like to see those those from Tuesday and yesterday the links are here and here respectively.

INDU 15min chart:

Stan and I are doing our monthly free public Chart Chat at theartofchart.net on Sunday. If you'd like to attend the link to register for that is here. The link can also be found on our May Free Webinars page.