by Springheel Jack

ES made decent progress yesterday and has established a decent rising support trendline.

There was some negative RSI divergence at the high yesterday but after some retracement that high has now been broken with some confidence. The next decent resistance is in the 1570/1 area:

There is the look of a rising wedge to the current move on the SPX 15min chart, and that would look stronger if we were to see a test and reversal back up off wedge support in the 1555-8 area today. The IHS target is in the 1574 area:

On the 60min chart, as I have said before, the obvious targets for this move are either to make a right shoulder high of an H&S in the 1574 area, or the second high of a double-top at a retest of the highs. If we are seeing a right shoulder form I would expect that to most likely take another two or three days at least for symmetry:

by Springheel Jack

There was a cliffhanger close on Friday, with ES having tested but not broken over declining resistance from the high.

Overnight ES has broken over that and I am expecting to see some follow through to the upside. as I mentioned on Friday Morning, this could be viewed as a falling wedge and in that case the technical target is a test of the highs, but wedges aren't good at making the full target, and there is strong resistance in the 1570/1 area:

Now that we have seen this break up on ES I will run through what I am seeing as an attractive scenario for what happens over the next few weeks as we see the usual strong retracement from the usual spring high. On SPX, as I have mentioned before, these highs generally take the form of an H&S or a double-top. I'm leaning towards an H&S at the moment, and as I was mentioning last week, the ideal right shoulder high would be in the 1574 area. The downside target for either an H&S or a double-top would be in the 1477 area:

One reason that I'm favoring the H&S scenario here is that there is also a clear short term IHS on the SPX 15min chart, and the target for that is in the 1574 area, at the ideal height for a right shoulder high. Declining channel resistance in the 1560 is resistance on the way there:

by Springheel Jack

In some ways there's really not a lot to add today to what I was saying yesterday morning.

Obviously we saw new retracement lows yesterday rather than the bounce I was expecting, but that has only strengthened the case for a bounce here. This is the second and last take for this scenario however, if we see much further downside then I will be looking considerably lower as I will explain.

Short term, if we are to see a bounce here, the key resistance levels on ES are the 50 hour MA at 1545 (holding as resistance overnight so far), and declining resistance in the 1553 area. If ES can get over those then the primary target is the 1570/1 area for the ideal right shoulder high. The secondary target is a retest of the highs to form the second high of a double top, but only if the 1570 area breaks with confidence:

On the SPX daily chart the lower bollinger band closed yesterday at 1536.03, and the low of the day was 1536.03. SPX closed back at the 50 DMA. This really is a natural level to see a bounce:

It is the SPX 60min chart that is worth the closest look this morning however, and there are several points to note on this today. The first note is that the low yesterday was an exact touch of rising support from the November low. I wasn't watching this particularly as it hadn't been touched in 2013 so far, but again this is a natural bounce level, and a decent support trendline there has now been established. The second note is that the low yesterday was a decent completion of the head on the possible H&S that is forming on SPX here. The third note is that this is not the only possible H&S neckline on this chart, as there is also one at 1485. If we see a break down from support here, I'll be looking at that level as the next major support level:

Running through the other indices they are variations on the same sort of theme.

The lower lows yesterday have strengthened the scenario for an H&S forming on Dow, and as with SPX positive RSI divergence on the 60min chart is marked:

The H&S scenario has also been strengthened by the lower low on RUT, though there is also a clear double-top scenario there.

If we see a clear break below 894 then the double-top target is in the 866 area:

We may be about to see a right shoulder bounce on TRAN, but as with RUT the is also a more immediately bearish scenario there as the H&S may already be complete. If so then on a clear break below the neckline the target is in the 5425 area:

by Springheel Jack

SPX didn't quite make my ideal H&S neckline at 1539 yesterday, but the low at 1543 was a viable completion of the head on a candidate H&S and the positive RSI divergence at the low suggests a strong bounce here.

The ideal targets for that bounce would be either the 1574 area to make the right shoulder on this candidate H&S, or a retest of the highs to form the second high on a double-top:

Scanning through other main equity indices Dow broke rising wedge support yesterday and was also showing positive RSI divergence at yesterday's low. The obvious target there is a retest of the highs:

RUT also made a low yesterday that completed the head on a candidate H&S pattern.

Again there was positive RSI divergence at the low yesterday:

Looking at TRAN, which like RUT peaked a month ago, there is another possible completion of the head on an H&S there, though there is an argument that pattern has already finished forming. No positive RSI divergence there at the low yesterday but there is a possible short term double-bottom:

by Springheel Jack

There's little doubt in my mind that this move up from November has topped or is topping out, but the exact form that top will take isn't yet clear.

SPX closed back above the middle bollinger band yesterday. The lower bollinger band at 1538 is an attractive target is we see a further decline today. That is in the same area as the possible H&S neckline at 1539, so if we see that area hit that will be a strong contender for a short term low:

On the SPX 60min the obvious candidates for a topping pattern are the H&S neckline around 1539 or a retest of the highs for a double-top. Secondary channel support is in the 1554 area:

I've been browsing through the other equity indices this morning looking for setups. The Dow is clearly the strongest, with primary trendline support there still unbroken, though that is the support trendline for a nicely formed bearish rising wedge:

by Springheel Jack

My sympathies this morning to the victims of the bomb blasts in Boston.

A particularly contemptible act by deranged and hate-filled idealists seeking to make the world a better place through indiscriminate murder. As far as I've been able to ascertain no group has yet claimed responsibility, but I'm sure the full power of the US is bent towards identifying the perpetrators and bringing them to justice.

SPX fell heavily yesterday and closed well below both the daily middle bollinger band and rising support from the November low. I'm pretty certain we are making or have already made the Spring interim high here and we should see an H&S or double-top form here, though it isn't clear yet which we are going to see:

I was looking earlier this week at the SPX 60min chart and talking about how sometimes a rising channel forms shallower channels as it is topping out. I drew in a candidate new channel then and while SPX didn't quite hit channel resistance on that at the 1597 high, the low yesterday was at that channel support trendline:

by Springheel Jack

SPX closed back just under the daily upper bollinger band on Friday.

As long as this uptrend continues SPX should stick close to the upper band. If it starts to fall away then the chances are that an interim high will have been made:

The second break of the rising channel on SPX since November is likely to be a strong break so I'll be watching channel support which is now at 1560:

ES bounced on Friday to retest the 50 hour moving average and then reversed back down again to make a new low within my target zone 1570-4.

Ideally we would see this hit within trading hours to retest broken resistance at the 2007 high. If ES is going to reverse back up this is the likely area. Declining resistance is in the 1580 area and the 50 HMA is now at 1582.75:

by Springheel Jack

Serious resistance has been broken this week and yesterday I was giving the next obvious targets over 1600, and the obvious target for this cyclical bull market much higher than that.

I do have some short term words of caution to add however and they are that:

• I am very doubtful about the current widely held assumption that QE means that we can have no multi-week and deep retracements
• The current dependence of the market on QE cuts both ways. It is broadly supportive as long as it lasts, but gains that are due mainly to QE may well be lost quickly as and when this round of QE ends. 
• Equities are in the strong topping period between the last week of March and the first week of May. If you stretch this period to the three months from the beginning of March to the end of May, the last year where a significant high or low was not made in this period leading to a reversal move of at least 8% was 1999, though there are then several more instances in the years before that.
• SPX has risen a long way and has not yet driven high enough on the current move to kill off the negative RSI divergence on the daily chart. 

EURUSD has reversed at the possible IHS neckline at 1.313 that I have been mentioning.

TLT is still testing strong support at the 2011 highs and I'm still leaning bullish on TLT overall, though it needs to recover back over the 200 DMA in the next few days.

Source: Springheel Jack

by Springheel Jack

It's been obvious for a while that the SPX 2007 intraday high at 1576 wasn't likely to hold long, but I was expecting a bigger retracement before it broke.

That was not to be and SPX broke and closed over resistance there with confidence yesterday. I've been looking at the daily bollinger bands pinching together on SPX for a couple of weeks now and noting that these tend to resolve into big moves. That big move should now be up so I'm expecting to see SPX over 1600 in the near future. SPX doesn't tend to wander far from the upper bollinger band however, and that tends only to rise at five or six points per day in a strong move up. That closed at 1578 yesterday and the likely closing range would be at 1582-4 today, so with the close yesterday at 1587 I'm expecting to see some consolidation today:

There is an obvious target for this move up, and that is the weekly upper bollinger band, now at 1611 and rising of course. Now that we have seen a confident break over the 2007 high I have drawn in a rising channel from the 2009 low on the weekly chart just to note that an obvious target for a cyclical bull market high in 2013-5 would be at the upper trendline of that channel, now in the 1700 area and rising about 150 points per annum. Thought for the day:

On the ES 60min chart a steep rising channel has formed from last Friday's low, but it's too steep to last long, and may well break today to establish a less steep and more sustainable support trendline. A marginal new high was made overnight on strongly negative RSI divergence and I have an M top target at 1576 on a break below 1580.50. The 50 hour MA is now at 1572, which would also be the right area to see a retest of broken resistance at the 2007 high:

by Springheel Jack

I tend to avoid talking politics as my own libertarian views aren't widely shared, but I've been listening with great amusement on the radio this morning to UK Feminists having to acknowledge that Margaret Thatcher advanced the cause of women's rights while criticizing everything else about her.