I have been posting charts every so often over the last year or so talking about the end of the bear market on precious metals, which either ended in 2013 and is now waiting for confirmation of that , or should end sometime over the next few months. As and when a new bull market is confirmed I'll be expecting the precious metals sector to be a very nice earner over the course of the next bull market there.

On the gold chart there is good reason to believe that the bull market low may be in. Gold was close enough to the triangle target for government work, just missed the 61.8% fib retracement of the bull market from the late 2008 low, has been trading back above the very key bull/bear dividing 150 DMA, and has a part formed double-bottom that would target the 1688 area on a clear break over 1434. Gold daily chart:

Panning for Gold
The GDX chart is still more bullish, with huge weekly positive RSI divergence at the lows, and what should be either a double bottom or IHS forming after the last falling channel broke up. The next obvious target is a test of 30/1, and on a clear break over there the target would be in the 40/1 area. I would mention on the bear side though that there was a huge H&S on this chart that I haven't marked up, but which targets the 13.5 area, and that target would now be within the overall fallling channel from the 2011 high. GDX weekly chart:

Well Monday was all set up for the bears, and they blew it. Yesterday was all set up for the bulls, and they blew it too. Of the two the bulls blew it worse in my view, and I'm going to review the very nice topping setups here on all four of the main US indices that I follow.

The first two are SPX and Dow, and on these two there are remarkably similar sequences of three nested double-tops with ultimate downside targets at tests of the broken 2007 highs.

On SPX the first thing to mention is very strong support at 1864, with both the daily middle band and the 50 DMA at 1864 at the close yesterday. If that should break then the first and smallest double-top support level is at the 1850 low. A break below that should be the start of a slide down this series of increasingly large double-tops down to a target in the 1578 area, effectively to retest broken resistance at the 2007 high. That might not all play out of course, but I did mention this target as possibility last summer as it is the obvious technical target for a big retracement here to set up the next big move up. SPX daily chart:

Four Grumpy Bears

The setup is remarkably similar on Dow, where the short term broadening ascending wedge from the 16312 low has now broken down with a target back at that low, which is double-top support for the first and smallest double-top setup on Dow. A break below should be the start of a slide down this series of increasingly large double-tops into a target in the 14050 area, slightly under broken resistance at the 2007 high at 14198. The full sequence of levels and targets for these series on both SPX and Dow are marked on the respective charts. Dow 60min chart:


The bears had a real shot at breaking this uptrend yesterday morning, but they blew it, as usual. That of itself would have been bullish but today is also Tuesday, and Tuesday has been up 17 of the last 19 sessions, a formidable track record. I'm leaning bullish today until demonstrated otherwise.

I'm going to keep it short as I will be doing a precious metals post three or four hours into the session and I'll look at three US equity indices to see what they can tell us about support and resistance here.

First is NDX, where the break below broken megaphone resistance was very swiftly reversed yesterday, and unless that changes today the pattern target is a test of the 3717.36 high. Making that target should at the very least have SPX testing the 1897 high, and might carry it considerably further. NDX 60min chart:

Three Little Pigs

On the SPX 60min chart the 50 hour MA was also broken at the open yesterday, but swiftly recovered. That is first support, and there is now a strong rising support trendline in the 1870 area. That is now important support and a break below that would be a sign of real weakness. SPX 60min chart:



'A quarrel in a faraway country, between people of whom we know nothing'
Neville Chamberlain, PM of Great Britain, talking about Czechoslovakia in 1938

Back in 1963 there was an significant milestone in the transition to modern warfare when the the name of the British Ministry of War was changed to the Ministry of Defence. Many other euphemisms about war have been used since then with 'police actions', 'military advisers' and many others becoming common.

At the same time the absurd situation arose, as the age of empires passed away and the British Empire was dismantled, that the only two remaining true empires, based in Russia and China, posed as anti-imperial powers, with the pejorative description 'imperialist' mainly applied by them to Western Powers who had already lost or given away their foreign territories.

Fast forward fifty years and this absurdity has survived even the worldwide collapse of Communism, and with it the ideological basis for arguing that Russian and China were not imperial powers. Separatism in Chechnya was put down by Russia with a brutality that was strongly reminiscent of Nazi Germany dealing with slavic untermensch. The half of Chinese territory that was dominated by ethnic Tibetans, Uighurs and Mongols is kept in line with harsh repression and long term policies of moving enough Han Chinese out into them to swamp the indigenous population and thereby ensure that these Chinese colonies can never be separated from Han China in the future. These things are a running sore in the world, but are obviously just some of the many terrible things that make the world outside the democratic industrialised part of this world that we live in so dangerous and cruel.


A key target for bulls yesterday was to break up from the falling megaphone on NDX, and they did that. As long as NDX can hold above broken megaphone resistance that is a bullish break with a target back at the 3717.36 high. If NDX breaks back below broken megaphone support then that would raise a possibility that this break may be a bearish overthrow with an ultimate target in the 3000-3100 area, so I'll be watching that trendline carefully. NDX 60min chart:

TGI Friday

Dow is now very close to testing the all time high made in April, and we may see that today. That would not of course negate the overall beautiful topping setup here, which will remain in play up to the 17130 area. Dow 60min:


The bears have had some decent opportunities this week, but each time the bulls have reeled them back and pushed up a bit further. With just a little more upside NDX is close to another test of falling megaphone resistance, and if NDX can break over that and hold above that trendline, then a major obstacle to more upside is cleared. NDX 60min chart:

A Wall of Worry

On SPX the 1884.89 high was taken out at the highs yesterday, and the next target is the 1897.28 all time high. Support at the 50 hour MA held well at the low yesterday and if we are starting a new impulse upwards, as many think, then that should continue to hold. Any significant break of the 50 hour MA, currently at 1875, will suggest strongly that SPX is still in retracement / consolidation mode. If we are in a new impulse upwards then I would note that the 1965 upside target that I gave last June could now be reached easily within the current rising channel. SPX 60min chart:


Yesterday was more tedious than I expected , though the bulls made some significant targets, notably the 50 hour moving averages on both SPX, now at 1873 and ES, now at 1868, so in effect at the same SPX level. The action yesterday looked somewhat bearish in the afternoon, and a new falling megaphone has been established, which I posted on twitter last night. If we see weakness this morning, which seems likely, then I will be looking for possible support at 1873 SPX. SPX 60min chart:

Slow Starter

If SPX breaks back below the 50 hour MA, then I have the next serious support in the 1860-3 range, with the daily middle band at 1863, and the 50 DMA at 1860. This should be very strong closing support, though we could see a move underneath intra-day. SPX daily chart:


The bears put on a brave show yesterday trying to break down through support but the afternoon rally wiped away the losses, and SPX closed well above support at the daily middle band and the 50 DMA. Now, with 16 of the last 18 Tuesday having closed green, the bulls have their shot at breaking out of the current range. SPX daily chart:

No Cigar

The first order of business for bulls today is to break back above the 50 hour MA, which was resistance just above at the close yesterday, and then to break above falling megaphone resistance for the current retracement. I have that in the 1874 SPX area at the close last night and it's possible that we could see SPX gap over that at the open. If that breaks (and holds) then the megaphone target will be a retest of the 1883.27 high, and if that is broken then the path will be open to retest the 1897 high. SPX 60min chart:


Hopefully everyone caught my warning on twitter on Thursday night that we might well see more downside, and in that case I'd be looking for support in the 1860-2 range. SPX went a little lower than that and at the time of writing is below both the ES 50 hour MA, currently at 1867 ES, and the SPX 50 hour MA, currently at 1870 SPX. These are important levels to watch today, as they are now short term overhead resistance.

Support has been at the daily middle bollinger band, now at 1862 SPX, and the 50 DMA, now at 1858 SPX. These are important support, and if this area is lost with any confidence, then I would be looking considerably lower, with the first target on SPX at the last low at 1814.36. A break below that low would trigger a double top target in the 1730 area, effectively to test larger double-top support at the 1737 low. A break with confidence below the 1737 low would then trigger a larger double-top target in the 1578 area, which is in the ideal range for any serious retracement this summer as it is a retest of the broken 2007 high at 1576. This is a topping setup that I am taking very seriously, and the first stone in the landslide down to that low would be if the 1858-62 support range being tested on Friday were broken with any confidence. SPX daily chart:

The Three Bears

There are signs of a bounce on the SPX 15min RSI that I'd expect to deliver in the absence of a strong downtrend. There is also a small falling channel with resistance in the 1870 area, which would be a very good fit with a test of the SPX 50 hour MA from below. Also worth noting on this chart is the double-top target at 1854 that has not yet been reached. SPX 15min chart:

The Three Bears

There is also an open double-top target in the 3495 area on the NDX chart I posted on twitter on Thursday night. The touch of falling megaphone resistance at the open on Thursday confirmed this as a valid pattern and there are only two clear target on this large (ultimately 70% bullish) pattern. The next target within the falling megaphone is south of 3300 and falling rapidly. If NDX can break and hold above falling megaphone resistance then the target would be the 3717.36 high. NDX 60min chart:

The Three Bears

The overall topping setup here on SPX is textbook, and I may well save it for use in a book I'm planning if it breaks down. The setup on Dow is even more so, and that is where I drew the three bears title for this post from. There are three nested double-tops on Dow here, and the first broke down and made target on Friday. That has established a rising channel from the April low on Dow, and if we are to see a strong rally here, then ideally that should hold. If it breaks then the obvious next target is that April low at 16015.32.That level is the medium-sized double-top support and a break with any confidence below would target a test of the February low at 15340.69. That is the large double-top support and a break below there would target the 14050 area. INDU 60min chart:

The Three Bears

On other markets USO is now close to the rising megaphone support I was looking at last week, and when that is hit there would either be a strong reversal back up, or a strong break down towards yet another double-top support level. USO 60min chart:

The Three Bears

This is an important support test and if bears can break this down then the spring high is most likely behind us now. There is a very decent topping setup and the seasonality is ideal. My only concern is that bear credibility is low at the moment but we'll see whether they can rise to the occasion. Whatever happens today, there is a very decent chance that we will see a green day tomorrow, as Tuesdays have been consistently bullish so far this year.

Source: Springheel Jack

After very solid AAPL earnings last night ES has gained 10 points and is testing those highs at the time of writing. This means that the inflection point that I have been talking about over the last few days is likely to be tested today and tomorrow, and the way this breaks will most likely determine direction for the next few weeks.

Front and centre this morning is the falling megaphone on NDX, with untested falling megaphone resistance in the 3610 area, and a distinct possibility that NDX will gap over that at the open. That would be bullish and would suggest strongly that SPX will test the highs, but NDX will still look potentially bearish because of the nice looking H&S forming there on the daily. The ideal H&S right shoulder high would be in the 3630 area, and I have an alternate, lower probability, falling megaphone resistance trendline in the 3670 area. NDX 60min chart:

Key Inflection Point Area

The setup on TRAN here is clearer, with megaphone resistance in the 7780-5 area today. In this context this pattern is a broadening top, which sounds bearish but is actually direction neutral. The test of megaphone resistance could signal a significant reversal back down. There is obvious negative divergence on the 60min RSI here, and SPX and NDX will also show negative divergence today on a break above the current RTH (regular trading hours) highs. TRAN 60min chart:


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