Rolling Over

SPX has reached a peak of 9.57% over the 45dma on this run. That's likely to be the highest reading as the 45dma is now rising significantly every day, and has risen 40 handles this week. We should now see a retracement that reaches at least close to the 45dma, now at 3971, and may go below it. Depending on the time taken to deliver that retracement I'd be leaning towards a target area 4000-50 as a very rough guide.

SPX daily 45dma chart:

I was talking about the possibility that we would see a small retracement first, then a rally high retest to re-set up the daily negative divergence on SPX and that's looking promising, with decent looking bull flags now formed on the equity indices. As these have made lower lows overnight, I'm showing you this on ES.

ES Sep 60min:

Not all the daily negative divergence was lost on the last move up last week. A possible RSI 5 sell signal is still brewing on NDX and one has fixed on IWM.

IWM daily chart:

There is a possibility that we don't see a high retest, and that H&S patterns have been forming here instead. That's best shown on the IWM 15min chart. I'm leaning towards the high retest about 70/30, but there is a possible setup to head down directly.

IWM 15min chart:

The RSI setup is also mixed on the FAANG stocks & sector ETFs. The chart below is AMZN where both RSI 14 and RSI 5 daily sell signals have already fixed. Others like AAPL could still use a high retest to re-set up daily negative divergence, but some look ready to go now. 

AMZN daily chart:

Equity indices are likely making at least a short term high here, so the question is how far that will go. If we are in fact setting up for a high retest playing out the bull flags all across the indices then we would likely see a fairly modest retracement into the 3900 - 4100 area before continuing higher.

Purely on the pattern setup here I am leaning towards at least an attempt to retest the all time highs, but the economic backdrop isn't promising and that may fail. If we do see that high retest I would be leaning towards that being the second high of a large double top before a likely move lower than the low made so far in 2022.

Is it possible that SPX is starting a big new bull move here? I'm doubtful but anything is possible in the markets. I would note that the big bull run in 1970-3 took place in a stagflationary economic setting. Overall in the 1970s though the market was heading sideways, and dropping significantly in real terms, so any big bull move would likely be short-lived.

We are doing our monthly free public Big Five & Key Sectors webinar at theartofchart.net at 5pm EDT next Thursday 25th August. I will be looking at the bull flag setups on most of these as well so that should be interesting. If you'd like to attend you can register for that here or on our August Free Webinars page.

My next post will likely be on Monday or Tuesday before the open.