Twas The Week Before Christmas

In my last post on Tuesday I was looking at a possible retracement that we then saw play out into a low on Wednesday afternoon.

Ideally I’d have liked to see the retracement go a little lower, at the least until the bear flags on Bitcoin, Solana and Ethereum all made their targets, but as it happened they all broke down but only Solana made the target at the retest of the prior low. That leaves unfinished business below that I expect to be revisited, most likely after next week.

The Santa rally this year has so far been spiky and uncertain, with Tech trailing rather than leading the pack, but for the next week at least the historical stats are impressively bullish.

The historical stats for SPX into the next week are as follows:

• Today - 61.9% bullish

• Monday 22nd Dec - 66.7% bullish

• Tuesday 23rd Dec - 66.7% bullish

• Wednesday 24th Dec - Half Day - 57.1% bullish

• Thursday 25th Dec - CLOSED

• Friday 26th Dec - 71.4% bullish

Looking at the setups on the shorter term charts on SPX, QQQ, DIA and IWM, the setup is clearest on SPX and I’ve marked that up in detail for everyone to look at.

From the December high at 6903.46 a small double top formed and reached target in the 6815-20 area. As that was playing out a larger H&S formed and broke down with a target in the 6722 area and that reached target at the low on Wednesday.

From Wednesday’s low and IHS has formed and broken up with a target at a retest of 6903.46, completing a round-trip retracement sequence. I’m not seeing anything at the time of writing to suggest this IHS won’t reach target.

SPX 15min chart:

On QQQ the sequence was similar, with the initial double top that reached target, but a larger H&S that failed on a break over the right shoulder high this morning, and an IHS that has formed and broken up with a target in the 627.50 area, close to the December high at 629.21.

I mention regularly that when H&S patterns fail, they often fail after an H&S pattern has formed in the opposite direction and this is a good example of that.

QQQ 15min chart:

There was no topping pattern on DIA, which retraced the least, but there is a very nice double bottom setup from the low, which on a sustained break back up over 483.578 would look for a target very close to a retest of the December high at 488.60.

DIA 15min chart:

On IWM there was a small IHS on IWM, not marked up but shown on the RTY_F chart I posted on Tuesday. That made target and a sharply downsloping (but decent quality) IHS has formed from the lows and broken up with a target in the 255.75 area, close to the December high at 257.34.

IWM 15min chart:

Could all these reversal patterns fail? Possibly, but the strong historical stats into a holiday week generally strongly favor the bulls. Most likely all these patterns make target and we see SPX and QQQ have a serious try at resolving unfinished business above by making new all time highs.

SPX and QQQ both broke below their daily middle bands during this retracement and both are trying to break back above them today. Bulls ideally need to break back above both at today’s close and deliver confirming second breaks above on Monday to deliver unambiguous bullish breaks higher.

On SPX (not shown below) the daily middle band is currently at 6810.44 and on QQQ it is at 615.69.

QQQ daily chart:

On the bigger picture I’m leaning towards a possibly sizable top forming here and most likely at least a bearish January. The inflation numbers yesterday morning lean bullish short term but are very concerning longer term as they appear to have been calculated in a way that was potentially politically motivated, to show an number that was unrealistically low.

I’ll be reading more about that at the weekend but it does already seem clear that in the absence of housing costs data for October (due to the government shutdown) a decision was made to use an estimated housing inflation number at zero, which was not an estimate based on any previous numbers this year. There also seems to have been a strange decision connected to the way that Black Friday sale prices were included.

This isn’t an immediate issue but there is a very serious concern that as the administration has already taken direct control of government statistics, and is moving toward direct control of the Fed from May 2026, that published economic statistics and federal reserve policy may become increasingly detached from economic reality. That of course might well seriously undermine confidence in US treasury and stock markets. I’ll be writing more about this over the holidays.

In the meantime I’m leaning strongly bullish into the end of Xmas week and the setups I have shown today should take these indices at least back into retests of the December highs and very possibly into new all time highs across the board. Everyone have a great weekend :-)

If you like my analysis and would like to see more, please take a free subscription at my chartingthemarkets substack, where I publish these posts first. I also do a premarket video every day on equity indices, bonds, currencies, energies, precious commodities and other commodities at 8.45am EST, but only for paying subscribers. Other places to find me are my page on the platform previously known as twitter, and my YouTube channel.

Six of One and ......

…. half a dozen of the other.

In my last post on Friday 12 December, I was looking at the rally since the late November lows, noting the new all time highs on DIA and IWM, and saying that I was still expecting to see all time high retests on SPX and QQQ in December.

I also noted that QQQ has been the slowest index in the rally so far, and that has made the rally after the initial move up spiky and uncertain. There is a setup here today that could go either way and I wanted to have a quick look at that as it is an interesting one.

On the bear side there are three H&S patterns that have broken down here. The first is on ES where an H&S has broken down with a target in the 6740 area.

ES Mar daily chart:

The second is on NQ where an H&S has broken down with a target in the 24605 area.

NQ Mar daily chart:

The third is on RTY where an H&S has broken down with a target in the 2515 area.

RTY Mar daily chart:

All the H&S patterns are high quality and there’s something else. I’ve been watching bear flags form on Bitcoin, Ethereum and Solana since late November and I wrote a post about that this morning after the bear flags on Bitcoin and Solana broke down yesterday. A further break down would fit with those flags making their targets at the retests of the late November lows.

The historical stats are also supportive with tomorrow as the only remaining significantly bearish leaning day on equities until new Year’s Eve, so the timing would be decent, and at the open this morning there were also still fixed hourly sell signals on all of SPX, QQQ and IWM, suggesting that we would see some decent, though limited, downside on all of those soon.

On the bull side there was an hourly RSI 14 buy signal fixed on SPX this morning, and another possible hourly RSI 14 buy signal brewing on IWM. Since then though that buy signal has failed and the positive divergence on IWM has been lost.

There is also the support at the daily middle bands that both SPX and QQQ were testing at the close yesterday.

On SPX the daily middle band is currently at 6783 and is still being tested. This is a strong support level that has held about 50% of time on a daily close basis when tested since the April low.

SPX daily chart:

On QQQ the daily middle band is currently at 613 and broke slightly at the close yesterday with the close at 610. There have been eight previous daily breaks below the daily middle band since the April low, and four of those closed back above the daily middle band next next day, rising to seven closing back above the daily middle band by the close on the second day after the break. That gives high odds that we see a close back above by tomorrow’s close, but that does leave room for some more downside in the meantime.

QQQ daily chart:

My preferred scenario in my Crypto post this morning was that both Crypto and equities see some more short term downside over the next day or two, and from there start another leg of the rally that would take us through Xmas and perhaps into the start of January. If we are to see that, then those H&S patterns may all reach target and then set up a buy opportunity into Xmas.

If you like my analysis and would like to see more, please take a free subscription at my chartingthemarkets substack, where I publish these posts first. I also do a premarket video every day on equity indices, bonds, currencies, energies, precious commodities and other commodities at 8.45am EST, but only for paying subscribers. Other places to find me are my page on the platform previously known as twitter, and my YouTube channel.

The Beautiful Bear Flags on Crypto

In my last post on 24th November I was saying that the bull market on Crypto was likely over, that the bear market has likely started, and was looking at the next likely downside targets in the first big decline of that bear market.

I was also talking about a rally that might be starting, and we have been watching that rally on both Crypto and equities since then.

The rally on equities has been powerful and some all time highs have been retested but on Crypto the rally has been muted and modestly sized bear flags have been forming.

I’ve been talking about these bear flags every day in my premarket posts and, as is often the case on Crypto, these have been very nice examples of bear flag patterns. By my premarket video on Thursday 11th December these had reached their likely final forms as shown below.

On BTCUSD (Bitcoin) that bear flag is a high quality rising wedge and started breaking down yesterday with a target at a retest of the November low at 80.6k. This kind of flag could evolve into a larger flag with a higher high:

BTCUSD 15min chart:

On SOLUSD (Solana) that bear flag is a channel and broke down yesterday with a target at the November low at 121.54. This kind of flag does not generally evolve into an alternate larger flag:

SOLUSD 15min chart:

On ETHUSD (Ethereum) that bear flag is also a channel and the flag has not yet broken down. The rally has been the strongest on Ethereum but I’m expecting Ethereum to follow the others soon and when it does the flag target will be a retest of the November low at 2621.04.

ETHUSD 15min chart:

The targets of all three of those flags would of course be retests of the November lows. So what are the options after that?

There are two main options and my view of the odds on those are influenced significantly by the timing of this break down.

Just to pull back a bit, what does it mean when we see correlated markets like Crypto and equity indices behave relatively to each other in the way that we have seen since this rally started in late November? This is something I have seen regularly in the past, particularly on the inversely correlated gold and USD.

When you see one of those correlated markets reverse strongly while the other consolidates sideways then it usually indicates that the strong trend on the sideways market (the downtrend on Crypto) is pausing while the other rallies, and that the strong trend will likely resume when that rally ends.

Has the rally on equity indices ended? Probably not, I’m still expecting all time high retests on SPX and QQQ as I was talking about in my post on Friday 12th December. The timing also looks early, with Xmas next week, so this is not a period where I would expect to see big declines on equities. If those are coming, and I think they may be, I’d be expecting those to start after next week.

This opens up the possibility that retests of the November lows on Crypto this week would be the start of a second phase of a rally while equity indices finish off the current move up over the next couple of weeks. If so the obvious options would be as follows:

On Bitcoin the obvious bigger picture target for this move down would be a retest of the April low at 74.4k. This is a big established support level and the full retracement of the rising wedge from the April low. It is also a H&S neckline and I’m expecting this area to be hit by the end of January.

If we see a retest of the November low and, we are to see a second stage of this rally start, then that low retest would establish a possible double bottom setup which, in estimated terms, on a subsequent break over this rally high at 94.6k would look either for a double bottom target in the 108k to 110k area or a fail back into a retest of these November and December lows.

Either way I’d then be looking for a fail back towards that 74.4k target.

BTCUSD 60min chart:

On Solana the obvious bigger picture target for this move down would be the H&S target at a retest of the April low at 95.24. This is a big established support level and the full retracement of the rising wedge from the April low. I’m expecting this area to be hit by the end of January.

If we see a retest of the November low and, we are to see a second stage of this rally start, then that low retest would establish a possible double bottom setup which, in estimated terms, on a subsequent break over this rally high at 146.91k would look either for a double bottom target in the 172 area or a fail back into a retest of these November and December lows.

Either way I’d then be looking for a fail back towards that 95.24 target.

SOLUSD 60min chart:

On Ethereum the obvious bigger picture target for this move down would be the H&S target in the 2050 area. I’m expecting this area to be hit by the end of January.

If we see a retest of the November low and, we are to see a second stage of this rally start, then that low retest would establish a possible double bottom setup which, in estimated terms, on a subsequent break over this rally high at 3455.03 would look either for a double bottom target in the 4300 area or a fail back into a retest of these November and December lows.

Either way I’d then be looking for a fail back towards that 2050 target.

ETHUSD 60min chart:

Since I started doing daily videos on Crypto early last year I’ve got Crypto direction right most of the time and more so than any other analyst anywhere that I’m aware of. I’m a very good analyst and all three of these instruments are very classical chartist friendly. I’m not much of a marketer though, and the free Crypto substack I set up last August still has less than 200 readers. I’d like to increase that readership and invite any suggestions on how I could do that.

If you’d like to see more of these posts please subscribe for free to my Crypto substack. I also do a premarket video every day (except tomorrow at 8.00am) on Crypto at 8.30am EST with morning charts for paying subscribers. All the videos I record are posted shortly after a delay of three days on my Youtube channel, and every post I publish is linked on my twitter.

Santa Rally Options

In my premarket video for subscribers on Friday morning on 21st November I was calling a likely rally and looking at weak hourly buy signals fixed or brewing across the board on ES, NQ, RTY and YM.

In my last post on Tuesday 25th November, after that rally had started strongly, I was looking at the resistance levels for the Thanksgiving week rally and looking at the levels at which the strong bearish setup at the start of that week would fail, triggering likely all time high retests across the board on SPX, QQQ, DIA and IWM.

Those levels were all hit and exceeded by the close on Friday 28th November, all the H&S patterns that broke down at the end of the previous week had failed, and all of SPX, QQQ, DIA and IWM had broken back over their daily middle bands and confirmed that break with a second daily close above them.

That was the start of this Santa rally, we have since seen new all time highs on DIA and IWM, and I’m expecting to see new all time highs on SPX and QQQ as well in December. Today I want to look at where this move likely goes from here.

SPX is close to a retest of the all time high, and that will likely be retested very soon. I’m expecting this rising wedge from the April low to hold into a much larger top coming in the next couple of months, but it is still possible that SPX might reach wedge resistance once more before that larger top and, if so, that wedge resistance is currently in the 7150 area.

There is an hourly RSI 14 sell signal fixed though that could fail as equities trickle higher towards Xmas. The equivalent sell signal on DIA failed yesterday.

SPX 60min chart:

QQQ is also close to a retest of the all time high and I’m expecting to see that retested before Xmas. I’m expecting this rising wedge from the April low to hold into a much larger top coming in the next couple of months, and the wedge has already overthrown so I’m not expecting that to be reached again for that reason and also because the current move up has been slowest on QQQ.

Tech has been the strongest performer by far this year but has been the weakest performer since the last low and I am thinking that relative underperformance may extend through next year.

There is an hourly RSI 14 sell signal fixed though that could also fail as equities trickle higher towards Xmas.

QQQ 60min chart:

DIA made a new all time high yesterday. I’m expecting this rising wedge from the April low to hold into a much larger top coming in the next couple of months, but it is very possible that DIA might reach and perhaps overthrow that wedge resistance once more before that larger top and, if so, that wedge resistance is currently in the 495 area.

The hourly RSI 14 and daily RSI 5 sell signals on DIA both failed yesterday.

DIA 60min chart:

IWM made a new all time high earlier this week, and has been the strongest on this move up from the last low, partly because IWM is seen as the most sensitive to interest rates. I’m expecting this rising wedge from the April low to hold into a much larger top coming in the next couple of months, but it is very possible that IWM might reach that wedge resistance once more before that larger top and, if so, that wedge resistance is currently in the 267 area.

IWM 60min chart:

After the next highs are made I’m leaning towards seeing at least a 5% to 10% correction on these equity indices in the first half of next year.

If you like my analysis and would like to see more, please take a free subscription at my chartingthemarkets substack, where I publish these posts first. I also do a premarket video every day on equity indices, bonds, currencies, energies, precious commodities and other commodities at 8.45am EST, but only for paying subscribers. Other places to find me are my page on the platform previously known as twitter, and my YouTube channel.

Thanksgiving Rally - The Key Resistance Levels

In my posts on 20th October, 24th October, and 28th October I was looking at the rising wedges on SPX, QQQ, DIA and IWM from the April lows and weighing the odds of these breaking down into a substantial retracement in the near future.

I was saying that these are all good quality mature patterns that I would normally expect to break down, but was concerned that we might instead see the start of a larger break up into December.

In my post on 7th November I was noting that all those wedges had broken down and gave some downside target areas that I was looking at initially.

In my last post on 20th November I was reviewing the bearish setups after all those initial target areas had been reached and looking at the larger H&S patterns that had since formed and were starting to break down.

I mentioned at the end of the post that a problem for bears might be that the historical stats all leaned bullish from last Friday through Wednesday. Thursday is the Thanksgiving holiday of course and Friday is a half trading day so in effect this whole but short holiday week leans bullish.

In my premarket video for subscribers on Friday morning I was calling a likely rally and looking at weak hourly buy signals fixed or brewing across the board on ES, NQ, RTY and YM.

Since Friday morning we have been seeing a strong rally and obviously the historical stats still lean bullish today or tomorrow, so the question is whether this rally could be strong enough to derail the bear setup and trigger a likely retest of all time highs on SPX, QQQ, DIA and IWM.

SPX has rallied back to the 50dma yesterday and, as ever, the key resistance level that I’m watching is the daily middle band, which closed yesterday at 6754.66. I’m also watching the daily middle band on QQQ (not shown below) which closed yesterday at 614.19. A confirmed break over either or both of these key resistance levels would likely deliver all time high retests across the board.

SPX daily chart:

On the SPX hourly chart an H&S broke down last Thursday with a target in the 6200 area. That H&S would be invalidated on as break over the H&S right shoulder high at 6770.35, slightly over the daily middle band.

SPX 60min chart:

On the QQQ hourly chart an H&S broke down last Thursday with a target in the 542 area. That H&S would be invalidated on as break over the H&S right shoulder high at 614.03, slightly below the daily middle band.

QQQ 60min chart:

On the DIA hourly chart an H&S broke down last Thursday with a target in the 433 area. That H&S would be invalidated on a break over the H&S right shoulder high at 468.44. However if this this H&S fails the right shoulder on an alternate and perhaps better H&S may be forming, so I wouldn’t see this as a major failure.

DIA 60min chart:

On the IWM hourly chart an H&S broke down last Thursday with a target in the 208.50 area. That H&S was invalidated on the break over the H&S right shoulder high at 239.10. However an earlier high quality H&S has previously broken down with a target in the 220.5 area and that H&S is still valid, so again, not a major failure yet.

IWM 60min chart:

The bottom line here is that SPX and QQQ need to hold their daily middle bands as resistance. If they do, the downside scenario still looks good and I’ll be leaning towards more downside. If SPX and/or QQQ break back over their daily middle bands and the H&S patterns on these fail I’d be looking for all time high retests across the board in a likely rally through Xmas.

If we do see more downside, I’d be expecting that to happen in the first two weeks of December.

If you don’t hear from me beforehand have a great Thanksgiving. :-)

If you like my analysis and would like to see more, please take a free subscription at my chartingthemarkets substack, where I publish these posts first. I also do a premarket video every day on equity indices, bonds, currencies, energies, precious commodities and other commodities at 8.45am EST, but only for paying subscribers. Other places to find me are my page on the platform previously known as twitter, and my YouTube channel.

The Bull Market On Crypto Is Likely Over

In my post on Wednesday 22nd October I was looking at the major support being tested on Bitcoin (BTCUSD), Solana (SOLUSD), and Ethereum (ETHUSD), and saying that sustained breaks below those support levels would boost the case that the bull market on Crypto had already ended, barring possible high retests as part of the topping process.

In my post on Thursday 30th October I was looking in detail at those key support levels on the weekly and daily charts and looking at the possible H&S patterns forming on the Solana and Ethereum charts.

In my last post on Tuesday 4th November I was looking at the H&S patterns on the Solana and Ethereum charts, which had started breaking down, and was warning that these big three Crypto instruments were on the verge of a clear break down that would likely confirm the end of the bull market from the December 2022 low.

Since then we have seen that break down, and the bull market on Crypto is likely over, barring a possible high retest on Bitcoin to make the second high of a double top.

In the shorter term Bitcoin reached the double top target in the 88.3k to 90k range, and then all the way down to 80.6k before starting a rally with equities on Friday.

This rally could have legs, this is Thanksgiving week, with bullish leaning days (on equities) Monday through Wednesday this week, a holiday on Thursday and a half trading day on Friday. A strong enough performance on equities this week could start a Santa rally, and that would likely pull Crypto prices up as well.

In terms of downside targets the key support at the 50 week MA, currently at 102,360, has been broken and we saw a second confirming weekly close below yesterday. If we see a strong rally from Friday’s low then that could be a rally target, but historically there’s no reason to expect a retest this soon after the break.

On the downside the double top has already reached target but there is another very obvious target below. The 2021 high was at 69k, and the first new high above that in March 2024 was at 73.8k. After a bull flag formed from there into October 2024 (which I called as it formed) then the next leg up was into 109.3k and the next bull flag (which I called as it formed) bottomed in April 2025 at 74.4k, an almost perfect backtest of the broken high at 73.8k.

What this means is that there is a very strong support level and possible H&S neckline in the 74.4k area and, if there is more downside coming soon, that would be the obvious target, and I’d expect to see decent support there.

BTCUSD weekly chart:

On the Bitcoin daily chart the obvious target for a strong rally would be at the daily middle band, currently in the 95.9k area. On a sustained break above that I’d be watching for the resistance at the 50 week MA, currently in the 102.36k area.

BTCUSD daily chart:

On the Ethereum weekly chart the key support was at the 50 week MA, currently in the 3100 area. That has now seen two weekly closes below so that is a confirmed support break.

ETHUSD weekly chart:

On the Ethereum daily chart there is still a fixed H&S target in the 2050 area, and I’m not seeing anything to suggest that target won’t be reached, but if we see a rally here the obvious first target would be the daily middle band, currently at 3172, and on a sustained break above those the obvious targets would be the 200dma, currently at 3509, just below the 50dma, currently at 3662.

Wherever this potential rally tops out, I’d still expect that H&S target in the 2050 area to be reached.

ETHUSD daily chart:

Solana is a somewhat different story, as Solana is the only one of these three where there is positive divergence on the daily chart. If we see a close today in the 137k area that Solana has reached at the time of writing, both RSI 14 and RSI 5 buy signals would fix.

The first big target for a rally would also be the daily middle band, currently at 144.15, but on a break above I would note that there is a possible double bottom setup on the chart below, and on a sustained break above 144.65 the double top target would be in the 160.60 to 167.75 area, setting up a possible backtest of the 50dma, currently in the 174 area.

On the downside there is a fixed H&S target at a retest of the April low at 95.24, and the IHS that had previously broken up with as target in the 282-3 was invalidated on Friday’s break below that IHS right shoulder low at 126.09.

Wherever this potential rally tops out, I’d still expect that H&S target at 95.24 to be reached.

SOLUSD daily chart:

What’s the bottom line here? This Crypto bull market is likely over, Bitcoin is likely in a topping process that might involve a high retest, and the next obvious big move on all three of these is a bear market that should last through 2026 into a likely low close to the end of 2026.

I’m not going to get another Crypto post out before Thanksgiving but I’m planning another post before the end of the week to look at what we can likely expect to see in the bear market that we should see next year.

Since I started doing daily videos on Crypto early last year I’ve got Crypto direction right most of the time and more so than any other analyst anywhere that I’m aware of. I’m a very good analyst and all three of these instruments are very classical chartist friendly. I’m not much of a marketer though, and the free Crypto substack I set up last August still has less than 200 readers. I’d like to increase that readership and invite any suggestions on how I could do that.

If you’d like to see more of these posts please subscribe for free to my Crypto substack. I also do a premarket video every day (except tomorrow at 8.00am) on Crypto at 8.30am EST with morning charts for paying subscribers. All the videos I record are posted shortly after a delay of three days on my Youtube channel, and every post I publish is linked on my twitter.

The Bull That Didn't Charge

In my posts on 20th October, 24th October, and 28th October I was looking at the rising wedges on SPX, QQQ, DIA and IWM from the April lows and weighing the odds of these breaking down into a substantial retracement in the near future.

I was saying that these are all good quality mature patterns that I would normally expect to break down, but was concerned that we might instead see the start of a larger break up into December.

In my last post on 7th November I was noting that all those wedges had broken down and gave some downside target areas that I was looking at initially.

On SPX I was looking at the 6675 area, and on a break below, the possible H&S neckline at 6555.

The 6555 target area was hit yesterday, and the wild rally from the low yesterday and then full reversal back into lower lows today set up the H&S right shoulder, which has now broken down with a target in the 6200 area.

SPX 60min chart:

On QQQ I was looking at the retest of the October low and possible H&S neckline at 589.05.

The 589.05 target area was hit yesterday, and the wild rally from the low yesterday and then full reversal back into lower lows today set up the H&S right shoulder, which has now broken down with a target in the 542 area.

QQQ 60min chart:

On DIA I was looking at the retest of the October low and possible H&S neckline at 454.41.

DIA came close to that H&S neckline yesterday and even closer today. The wild rally from the low yesterday and then full reversal back into lower lows today set up the H&S right shoulder, which has now broken down with a target in the 433 area.

DIA 60min chart:

On IWM I was looking at the retest of the October low and possible H&S neckline at 237.55, though I noted that target was a lot closer than on the others as IWM had been leading the decline.

IWM hit that 237.55 target area, formed and H&S right shoulder and then broke down. However it then hit a lower alternate H&S neckline at 231 yesterday. From there the wild rally from the low yesterday and then full reversal back into lower lows today set up the larger H&S right shoulder, which has now broken down with a target in the 208.5 area.

IWM 60min chart:

I’ve been calling this pretty well on the way down, though the speed has surprised me.

In my subscriber only premarket video yesterday morning I had five of my six equity index futures with hourly 60min buy signals fixed or brewing, and predicted a strong rally.

In my subscriber only premarket video this morning I was looking at the possible H&S patterns forming across these four US equity indices and gave target areas which were all reached. I said I was expecting a low retest afterwards which we then saw this afternoon.

I will confess though that I was really expecting to see the lows retested on Monday or Tuesday and, if seen, that would have been considerably more bullish, with multiple possible daily RSI 5 buy signals forming at the low retest. The rally never made it to the close today, so those theoretical buy signals never had a chance to form.

That matters because the break down from these H&S patterns is an inflection point, and I would expect to see one of two outcomes here. The first is of course that these indices head further down and hit their H&S targets.

The second is that we see a full rejection back into the all time highs on all four of these indices, perhaps using the possible double bottoms formed by yesterday rally and today’s low retest to start that full reversal.

I like the double bottom setups here, but buy signals are very thin on the ground, with the only notable one being the hourly RSI 14 buy signal fixed on DIA. Usually if a full reversal was imminent, there would be more clues to suggest that might be coming.

In today’s premarket video I was asked whether I was expecting to see this decline last into the end of the year and I said no in reply. If we continue down from here then I’d still be looking for at least a strong rally and perhaps all time high retests in December, though likely as part of a larger topping process.

In the meantime there are clear targets below, and not much suggesting those won’t be hit. On the IWM daily chart below you can see that the daily middle band is turning down harder, the bands have expanded and there is plenty of room below to fall without hitting the daily 3sd lower band. Until we see more signs of life from bulls I’m looking lower.

IWM daily chart:

One potential fly in the bears’ soup however is that the historical stats all lean significantly bullish tomorrow through Wednesday next week. That hasn’t meant much in November so far but I’ll be watching that. The next bullish leaning day after Wednesday is on 8th December.

If you like my analysis and would like to see more, please take a free subscription at my chartingthemarkets substack, where I publish these posts first. I also do a premarket video every day on equity indices, bonds, currencies, energies, precious commodities and other commodities at 8.45am EST, but only for paying subscribers. Other places to find me are my page on the platform previously known as twitter, and my YouTube channel.

The Rising Wedges Break Down

In my posts on 20th October, 24th October, and 28th October I was looking at the rising wedges on SPX, QQQ, DIA and IWM from the April lows and weighing the odds of these breaking down into a substantial retracement in the near future.

I was saying that these are all good quality mature patterns that I would normally expect to break down, but was concerned that we might instead see the start of a larger break up into December.

My concerns to the upside were firstly that November and December lean significantly bullish, and that remains the case of course.

Shorter term I was concerned that the Fed cut might trigger an upside break but that didn’t happen.

I was concerned that an agreement with China might trigger an upside break but that didn’t happen.

I was concerned that this week is historically one of the most bullish weeks of the year and might kick off an upside break but that didn’t happen either.

Instead we have seen all of the rising wedges except the one on DIA (so far) break down and the downside has been persistent, delivering breaks below the daily middle bands on SPX and QQQ yesterday, a test of the daily middle band as support yesterday on DIA and a move to the daily lower band on IWM.

So what now? Well the first obvious point to reverse back up to the highs earlier this week was on Wednesday morning, when I was looking in my premarket video at the hourly buy signals fixed or forming on ES, NQ, RTY and DAX. That delivered a decent rally, the buy signals reached their targets, and the downtrend then resumed.

There is another opportunity to do that this morning, with hourly buy signals currently forming on ES, NQ, RTY, YM and DAX. That too could deliver a full reversal back up, but in the event that also fails to deliver that I’m going to look at the obvious target areas below on SPX, QQQ, DIA & IWM.

Looking at SPX there was a clear break yesterday below the daily middle band, which closed yesterday at 6748.75. If we see a close back above that today then that may be the start of a rejection back to the highs. If not then that would invite more downside. There was also a clear break below rising wedge support.

Where would the obvious downside target be? I have two levels. The first is the rising support trendline from the August low, currently in the 6675 area, but the main one would be a retest of the October low and possible H&S neckline at 6555.

SPX daily chart:

Looking at QQQ there was a clear break yesterday below the daily middle band, which closed yesterday at 614.50. If we see a close back above that today then that may be the start of a rejection back to the highs. If not then that would invite more downside. There was also a clear break below rising wedge support.

The obvious downside target would be a retest of the October low and possible H&S neckline at 589.05.

QQQ daily chart:

DIA tested the daily middle band, currently at 468.47 at the low yesterday, and that has held so far and may hold today. Rising wedge support has not been tested so far, but is not far below in the 465 area.

If both of those break then the obvious downside target would be a retest of the October low and possible H&S neckline at 454.41.

DIA 60min chart:

IWM has been the weakest of these four indices lately and broke below the daily middle band last week, almost reaching the daily lower band yesterday.

The obvious downside target there is also the retest of the October low and possible H&S neckline in the 237.55 area, though that target is much closer on IWM than on the others.

IWM 60min chart:

I’ve been publishing a chart of the day every day on my twitter for a while now as I see a lot of interesting charts in my reading and draw some more of those myself.

I have mentioned regularly the common misconception that the Fed sets interest rates, when in truth borrowing rates are based on the thirty and ten year treasuries, so Fed cuts don’t necessarily have any real world impact on borrowing rates.

I wrote a post mentioning this on 10th November last year and said:

Could the Fed solve this problem by keeping interest rates low? No, real long term interest rates are set by the government bond markets, and those long term treasury yields, ten year yields on TNX and thirty year yields on TYX, are determined by supply and demand on those bond markets. That’s the reason that while the Fed has reduced their benchmark rate by 0.75% over the last two months, government bond markets raised the yield on US 10 year treasuries by 0.88% over the same period. The Fed doesn’t control bond markets, any more than sailors control the sea.

The chart below illustrates that truth with the black and yellow trendlines being the thirty and ten year treasury yields respectively. I have added two boxes to highlight the Fed cuts in the last four months of 2024 and the cutting cycle starting now. The Fed has now cut 1.5% over this period and from when that cutting process started thirty year yields are currently up 0.75% and ten year yields are currently up 0.6%.

Borrowing costs have therefore risen significantly during this cutting cycle. They have also risen so far since the last rate cut in late October:

This retracement could be bottoming out here and the hourly buy signals brewing on multiple index futures charts could deliver that. Overall though I’m still leaning lower after a possible rally here and the obvious next big downside targets and support levels are the ones I’ve given above.

The bullish historical stats for this week were a bust. Next week leans neutral every day except Tuesday, which leans strongly bearish.

In the next few days I’ll be looking at the pattern setup for a possible bigger picture high forming here in another post.

If you like my analysis and would like to see more, please take a free subscription at my chartingthemarkets substack, where I publish these posts first. I also do a premarket video every day on equity indices, bonds, currencies, energies, precious commodities and other commodities at 8.45am EST, but only for paying subscribers. Other places to find me are my twitter, and my Youtube channel.