Knock Knock

We did our monthly free public Chart Chat at theartofchart.net at 4pm EST on Sunday looking at the options on equity indices as well as looking at the usual wide range of other markets. If you'd like to watch the recording that you can do that here or on our February Free Webinars page.

At the closing print of January an RSI 5 sell signal fixed on the SPX monthly chart. There was already an RSI 14 sell signal fixed but the RSI 5 sell signal is a much more reliable and shorter term signal that has much improved the odds that SPX will deliver the ideal backtest of the 3800 - 3900 area that I've been writing about regularly since my August 6th post last year.

I'm still reviewing the past performance of these signals but I'm expecting to do a post on Thursday morning reviewing the performance of these in detail over the last few decades.

SPX monthly chart:

The rally high last week was a decent test of main resistance at the weekly middle band, now at 4576. That is still main resistance but, if broken and converted to support, would open a possible retest of the all time highs. That is the main resistance level that I am watching here.

SPX weekly chart:

Shorter term though support and resistance are mainly about two shorter term moving averages. The first is the daily middle band, which SPX broke back over on Wednesday last week and then rejected the next day. Since then SPX has traded Friday and Monday below it with the daily middle band close to or at the high on Thursday, Friday and Monday.

This is a concern, best expressed by a trader I was chatting with a few years ago who remarked that the longer a market keeps knocking on a door, the more likely it is that the door will open. Bottom line here is that if SPX doesn't break lower soon there will likely be another attempt to break up over the daily middle band, now at 4520.

SPX daily BBs chart:

Support for the last two days has been at important short term resistance at the 50 hour moving average, now at 4489. That was broken at the lows on Friday but not converted to resistance. It was broken slightly yesterday at the close and SPX closed six handles below it. If that can be converted to resistance then the path clears to head lower directly, though I am still watching that possible bullish IHS forming on IWM of course.

SPX 60min chart:

The falling channel on Dow is still looking good, with trendline resistance now in the 35500 area. Rising support from the low was breaking slightly at the close yesterday and if that can follow through as well today then that clears another significant short term support level.

INDU 15min chart:

This inflection point likely resolves downwards but if that doesn't happen today we may well see SPX try to break over resistance again. I'd note that this is a bullish leaning week, with historical stats of green closes over 60% today, tomorrow and Friday.

We are doing public webinar at theartofchart.net on 'Trading Commodities - Setups and Approaches' an hour after the RTH close on Thursday. We will be looking at at commodities markets and will be designing two options trades that could be used to take advantage of potential moves in two of those markets. If you'd like to attend you can register for that here or on our February Free Webinars page.