Approaching Key Support

I was talking in my last post on Friday about the likely mean reversion move coming that should at least return SPX to a backtest of the 45dma, now at 4549. The low so far today has taken SPX down to the 4565 area, so that is getting close, and SPX is now in an area where it may turn back up, though I think a test of 4540 is likely at minimum before that happens.

SPX daily vs 45dma chart:

On the daily SPX chart the fixed RSI 14 sell signal is still well short of target, but doesn't need to reach target before a serious rally or high retest from the next low. The rising support trendline on SPX from the March 2020 low is currently in the 4485 area, and would be the next obvious big support level on a sustained break back below the 45dma, currently in the 4550 area.

SPX may struggle to go lower than the lows reached today as the 3sd daily lower band is currently at 4573, and the current LOD at 4565 was eight points below that. If we should see a close on or below the 3sd lower band today then that would be a strong sign that a short term low is in or very close.

SPX daily chart:

On the SPX 15min chart the open double top targets at either 4540 or 4515 areas are getting close.

SPX 15min chart:

On NDX the fixed daily RSI 14 sell signal is only halfway to target, and while the last retracement was led by tech, this one is being led by the Russell 2000 and Dow Industrials. That is promising for tech longs after this retracement ends.

NDX daily chart:

On NDX there is a large possible H&S forming on the 15min chart. I'm doubtful about that delivering much unless SPX can break below rising support in the 4485 area, but it is the kind of setup where the neckline would often break before a rejection back up into the highs.

NDX 15min chart:

The obvious target on SPX is the 4540 area and I think that will likely be tested in the next day or so. That would be a candidate low area. If broken significantly then I'd be watching the key support level on SPX at rising support from the March 2020 low, now in the 4485 area. I'm not expecting that to break on this move, but if it does that could open significant further downside.

I was saying on Friday that the historical stats yesterday leaned strongly bullish yesterday and bearish today and those both delivered. The next few days are modestly bearish tomorrow (Wednesday) and Friday. significantly bearish on Thursday, and leaning neutral to modestly bullish next week.

We are in the last couple of days running our annual Black Friday and Cyber Monday sale until midnight on Wednesday 1st December, with deep discounts on annual memberships at theartofchart.net, and if you are interested you can find out more about that here.

Thanksgiving Thoughts

 UPDATE NOTE - Since I wrote this post last night, SPX/ES has obviously broken down from the asymmetric double top there with alternate targets in the 4540 and 4515 (both SPX) areas, though so far, NDX/NQ has not yet broken down.

So far this week SPX has defied the historically bullish tape over Thanksgiving and that strong historical bullish bias extends into the close on Monday. I was leaning towards seeing at least a backtest of the 4540 SPX area after that but it looks like we may see that before.

MAIN POST - 

The big number on the equity index board at the moment is the high SPX made a few days ago at 5.54% over the 45dma, which closed Wednesday at 4538. SPX is likely topping out here for a reversion to mean move, and the mean I use is that 45dma, so I'm watching for a setup to take SPX back to that area.

Could a larger high be forming here? Yes, and I'd refer back again to the backtest scenario that I was looking at in my post on Friday 6th August. This could well be setting up for that backtest here and I'll be watching the next retracement with great interest. If seen, and then followed by new all time highs, then this could fix an upside target on SPX in the 6500 area, so that might well be a bullish backtest of course.

SPX daily vs 45dma chart:

In my last post on Monday I was looking for a new all time high on SPX to add to the one already in place on NDX, and we saw that on Monday morning. That set a possible daily RSI 14 sell signal brewing on SPX, and that sell signal fixed at the close on Wednesday.

Since then SPX has defied the bullish stats this week and retraced to test the daily middle band, now at 4670, as support. If that breaks and converts to resistance then that reversion to the mean move may well be in progress.

SPX daily chart:

Is there a setup to deliver a move to that area in place? Yes, there is a decent quality double top setup formed here, shown on the 15min chart below. On a sustained break below 4630.86 the alternate double top targets would be in the 4540 or 4515 areas.

SPX 15min chart:

NDX has also been testing the daily middle band, currently at 16202, as support, and that has held so far. On a break and conversion to resistance the daily RSI 14 sell signal brewing on NDX should fix as well.

I'd note that the other two main US indices that I track, the Russell 2000 and Dow Industrials, are both considerably weaker than SPX and NDX, and are both currently holding their daily middle bands as resistance.

NDX daily chart:

Is there are setup to deliver a move lower in place on NDX? Yes, a possible H&S is forming, and a sustained break below the 16100 area would look for the 15550 area.

NDX 15min chart:

The historical stats for the Friday and Monday after Thanksgiving are impressively bullish so I'm doubtful about seeing much downside before the historically bearish last day of November on Tuesday, but that being said, the same could have been said on Monday morning, and the fast new high then died into a retracement that lasted into Wednesday.

A couple of things to mention before the weekend. Last weekend we did our monthly free public Chart Chat at theartofchart.net with a look into what we are seeing for the first six months of 2022, and if you'd like to see that you can see that here, or on our November Free Webinars page.

On Wednesday we did our monthly free public Big 5 & Key Sectors webinar at theartofchart.net, and if you'd like to see that you can see that here, or on our November Free Webinars page.

We are also running our annual Black Friday and Cyber Monday sale with deep discounts on annual memberships at theartofchart.net, and if you are interested you can find out more about that here.

Everyone have a great holiday weekend :-)

Options For Next High

 As I was saying in my last post on Monday, the all time high on SPX a few days before was at an impressive 5.54% over the 45dma and, excluding the spike up after the low last year, was one of the highest against the 45dma in the last decade. This is a good indication that SPX is topping out for at least a reversion to the mean move, that mean being the 45dma, currently in the 4517 area.

I was looking for retests of the high on SPX and NDX particularly to set possible daily RSI 14 sell signals brewing, and so far NDX has made a new all time high as expected, and ES (the SPX future) has also made a new all time high on Thursday night. SPX has failed to make a new all time high by less than one handle on Friday but we may well also see that on Monday, at which point a daily RSI 14 sell signal will also start brewing, joining the ones already brewing on ES, NDX and NQ.

SPX daily vs 45dma chart:

NDX looks very promising for a high being made in this area, as it punched 300 handles over the weekly upper band at the all time high made two weeks ago, and closed 280 handles above again on Friday. this has historically been an excellent indicator for at least a short term high being made or very close.

NDX weekly chart:

Are there any indications that equity indices might nonetheless break a bit higher in the short term. Yes, so there is a choice to be made here, as there so often is. On the RTY chart below you can see that while SPX/ES and NDX/NQ have been retesting the highs, a decent looking bull flag has been forming on RTY that may be setting up a high retest on RUT/RTY. If seen then a possible daily RSI 14 sell signal would start brewing there too.

RTY Dec 60min chart:

Exactly the same can be seen on and said of the Dow/YM chart. Again I am wondering whether this may be setting up a high retest.

YM Dec 60min chart:

Is there an obvious target above on SPX that I would be looking for in the event of a break higher next week? Yes. There is a clear resistance trendline above on SPX currently in the 2760 area, and if seen, I'd be looking for resistance there.

SPX 60min chart:

Could a larger high be forming here? Yes, and I'd refer back again to the backtest scenario that I was looking at in my post on Friday 6th August. This could well be setting up for that backtest here and I'll be watching the next retracement with great interest.

We are running our monthly public Chart Chat at theartofchart.net today at 4pm EST and if you'd like to attend you can register for that here , or on our November Free Webinars page. We will be looking at the setup on equity indices here as well as the usual very wide range of other instruments. We will also be looking ahead into the first six months of next year.

There is another thing I'd like to mention. I'm developing a new daytrading room with my long term daytrading collaborator Paul Buckles. That's in late beta at the moment and I'm looking for a few of my longer term readers who daytrade to come and join us while we are making this ready for market. Obviously there would be no charge and we will be explaining our methods, which are mainly mathematical, as we do this. For any who then want to join when we launch the room there will be a reward in the form of a special discount for them. If you're interested email me on springheeljack666 at gmail dot com.

Mean Reversion Looks Close

The last high on SPX reached a few days ago was an impressive 5.54% above the 45dma, one of the highest readings in the last decade excluding the initial spike up from the March 2020 low, and slightly above the 5.4% reached at the early 2018 high. Coupled with the strong punch over the NDX weekly upper band then, that is a strong indicator that at least a short term high is being made, and I'm looking for a reversion to the mean move back to the 45dma, currently in the 4491 area.

SPX Daily vs 45dma chart:

The decline last week looks like a bull flag and, if so, that flag has likely broken up into what will likely be a full retest of the all time high at 4718.50. That full retest will set a possible daily RSI 14 sell signal brewing on SPX and, if also seen on NDX, IWM and INDU, would also set daily RSI 14 sell signals brewing on those.

SPX daily chart:

Could SPX go higher? Well I'd expect at least a marginal higher high, but if SPX goes much higher than that I'll be watching possible trendline resistance now in the 4750 area.

SPX 60min chart:

On NDX the obvious resistance trendline has already been hit and slightly overthrown so I'm doubtful about much more than a high retest there.

NDX daily chart:

Could a larger high be forming here? Yes, and I'd refer back again to the backtest scenario that I was looking at in my post on Friday 6th August. This could be setting up for that backtest here and I'll be watching the next retracement with great interest.

We ran our monthly public Chart Chat at theartofchart.net yesterday and if you missed that you can see that here, or on our November Free Webinars page. We look at the setup on equity indices there as well as the usual very wide range of other instruments. Particularly interesting looking setups on bonds, USD and silver if you are taking a look.

There is another thing I'd like to mention. I'm developing a new daytrading room with my long term daytrading collaborator Paul Buckles. That's in late beta at the moment and I'm looking for a few of my longer term readers who daytrade to come and join us while we are making this ready for market. Obviously there would be no charge and we will be explaining our methods, which are mainly mathematical, as we do this. For any who then want to join when we launch the room there will be a reward in the form of a special discount for them. If you're interested email me on springheeljack666 at gmail dot com.