SPX just kicked around without any definite direction yesterday and so far today the same again, though we be starting to resolve down. This sideways again is neither bullish nor bearish, and is a decent fit with both the H&S and larger IHS scenario marked on the 60min chart below.

What is potentially interesting here is key support on the 50 hour MA, with that currently at 1909 and SPX at 1890 at the time of writing. If bears can convert that into resistance, having been support all yesterday, then we may resolve in the obvious direction, which is down. SPX 60min chart:


My speculation yesterday morning that SPX might well retest the ES weekly pivot at 1909 from the ES low for the day at 1865 proved to be right, and the possible H&S that I was speculating about in the morning has now made an ideal right shoulder high. You can see the setup on the 15min chart below. If this pattern completes and breaks down, then we should see the retest of the 1812 low in the next couple of weeks. SPX 15min chart:

Still Ambiguous

Down is very much the obvious direction here, as the rising wedge that formed from the low is an obvious bear flag on the bigger picture. If the H&S completes and breaks down then the first target is the retest of the 1812 low, and on a sustained break below, the full flag target would be in the 1690 area, though there is strong support in the 1750-60 area at the rising support trendline from the March 2009 low.

What I would very much note here is that a move to retest 1950 SPX would complete a possible IHS that would target a retest of 2080. That's really not the obvious option here, but if we should see a break over the current rally high, I would be taking this IHS seriously, though there would still be major resistance in the 2000-20 area. SPX 60min chart:

Still Ambiguous

If we should see a break up today then key closing resistance is at the 5dma, currently in the 1917 area, and almost exactly at yesterday's high. A closing break back over this today would be cautiously bullish. SPX daily 5dma chart:

Still Ambiguous

Also potentially bullish here is that ES established a rising channel at the low yesterday, and TF did the same. Until ES breaks this channel then there is obviously potential for the next target to be at channel resistance, currently in the 1960-70 area. The two important resistance levels to watch here are the ES weekly pivot at 1909 (1915 SPX area) and the ES monthly pivot at 1925 (1931 SPX area). If those levels can be broken and converted into support then the bullish scenario here has a serious shot. Until that happens the obvious lean is continuation down. ES Mar 60min chart:

Still Ambiguous

Today is another cycle trend day, so there are 70% odds of the day being dominated by buyers or sellers. The ES action overnight isn't encouraging for bulls so far, and it this is going to resolve down today then I'll be looking for an AM high that fails.

Source: Springheel Jack

Some days things happen so fast after the open that by the time I get my post up much of the post is already out of date. This is one of those days. On the charts below I outlined a possible bull scenario and assigned it a possibly overgenerous 25% probability weighting. That is a lot lower now as the overnight rally failed hard at the ES weekly pivot at 1909, which was the key support level I gave on ES yesterday morning.

On the plus side I shorted the obvious resistance at 1909 ES and my runner from that trade is currently +33 or so, so I'll keep my grumbling to a minimum.

On the bear scenario the rising wedge rally from the 1812 low broke down yesterday after an ideal 50% fib retracement of the falling megaphone from 2081, and as that rising wedge was a bear flag on the bigger picture. the alternate targets for the bear flag are either a retest of the 1812 January low, or the full flag target in the 1690 area. The high this morning was a perfect retest and hard fail at broken rising wedge / flag support. SPX 60min chart:


SPX had a strong day yesterday but has given it all up overnight. 15min RSI 14 and 60min RSI 5 sell signals are brewing and may well fix this morning. This is a possible rally high, especially as SPX tested the 50% fib retrace target at the high yesterday.

The important support levels on SPX this morning are rising support in the 1910 area and the 50 hour MA in the 1905 area. If SPX breaks below those levels then the rally bear flag has broken and the first big target is a retest of the January low at 1812. While those levels hold SPX still has a shot at reaching the 61.8% fib retrace target at 1978. SPX 60min chart:


SPX failed to get back to 1990 by the January close, so I'm calling this year for the bears on my first three days of January stat. I outlined this setup on 7th January and you can see that post here. Of the six years in the last 43 years where this stat has fixed at the end of January the best two performers were up 3% and 1%, last year was marginally red, and the remaining three were down 10%, 11% and 39% (2008) respectively. The odds are now against anything better than a flat close this year.

In the short term ES has broken up from an ascending triangle and I'm expecting broken resistance at 1912 ES (~1917/8 SPX) to be retested this morning. That might not happen as it has already been retested overnight, but we'll see. The full triangle target is in the 2020 area, but these are bad at making target and Bulkowski recommends using a target at 61% of the full target. That would put this target in the 1978 area, which may well still be overambitious. ES Mar 60min chart:

Some More Upside Likely

There is still a 60min buy signal that has not yet made the full target and I'm expecting that to be made. I like the IHS target at 1970 SPX as a target and that should be in the right range for a rally high this week. SPX 60min chart:


SPX has been compressing for a few days now and we are going to see a move very shortly. I'm leaning long for that move but it's possible both that any new high will be marginal, on the possible rising wedge option, or we may go straight down through support, on the double top option. Only if bulls can convert possible wedge resistance into support does the IHS target open up as a target, and even then there is significant resistance both at the daily middle band in the 1930 area, and possible channel resistance in the 1940 area. SPX 15min chart:


The key support areas I am watching today are the 50 hour MA at 1884 and the ES weekly pivot at 1868 (approx 1875 SPX). If bears can break these and convert them to resistance then we may well be on the way back to test the low at 1812 SPX. SPX 15min chart:

Looking Down?

NDX 15min chart:


I mentioned on twitter last night after the close that the bulls narrowly managed to avoid a 5dma three day rule breakdown with a target at a retest of the lows. There was more downside overnight that reached my ideal target on ES at a retest of the 1850 area and ES then reversed back up hard there. There is a strange myth that globex highs and lows always need to be retested soon after. I've been watching that for a while and have seen little evidence to support this, and there's no need to see that here.

Stan called the 1850 target and that should be the B wave low on this ABC rally. Where is C going? Well that's where it gets interesting.

The first thing to notice on the ES, NQ and TF charts is the very large mostly formed IHS patterns on them. These are now all fully formed and testing their pattern necklines. If they break up then that would make the obvious target for the C wave at a retest of the 100 week MA, currently at 2008 SPX. That is a very important resistance level in bear markets and was an obvious target area for any strong rally here. I would be very pleased to see that tested.

ES, NQ, TF, CL, and ZB looked particularly interesting this morning & I mainly traded CL today, as the setup there was the nicest, and I managed to capture most of the move up from the open.

ES Mar 60min chart:

Bold Numbers

NQ Mar 60min chart:


SPX broke back over the 5dma on Friday with considerable conviction, so today and tomorrow are the other two days on the 5dma Three Day Rule, explained on the chart below. In essence though, if we should see a daily close significantly below the 5dma either today or tomorrow, currently at 1880, then a retest in the very near future of the low at 1812 would be very likely. I have found no exceptions to this rule since the start of 2007 on something like forty instances where there was a Three Day Rule breakdown.

I would add that there are now fixed RSI5_NYMO and RSI 14 buy signals on SPX so I am expecting more upside. That doesn't rule out a retest of the lows but if we see the initial retracement today that I'm leaning towards, I'll be looking for that to be forming a right shoulder on a large possible IHS that would target the 2000 area. SPX daily 5dma chart:



One of the things we were looking at was the importance of the 100 week MA in confirming bear markets and I ran the stats on that this morning for the lifetime of SPX. The SPX retest stats are as follows:

- 1930 - Retest and fail to new lows
- 1938/9 - Test as resistance for a year then break up
- 1940 - Retest and fail to new lows
- 1947 - Retest and fail to new lows
- 1953 - Retest and fail to new lows
- 1957 - Broke up to lower high, made lower low, then uptrend resumed
- 1960 - Broke above for 4 weeks, then lower lows, then uptrend resumed
- 1962 - Broke up and resumed uptrend
- 1966 - Retest and fail into new lows
- 1969 - Retest and fail into new lows
- 1973 - Retest and fail into new lows
- 1978 - Broke up to lower high, made higher low, then uptrend resumed
- 1981 - Retest and fail to new lows
- 1987/8 - Test as resistance for a year then break up
- 1990 - Fail to higher low then uptrend resumed
- 2000/1 - Retest and fail to new lows
- 2008 - Retest and fail to new lows
- 2011 - Retest and fail to new lows
- 2015 - Broke up into lower high then lower lows

Do we need to see a retest of the 100 week MA before more downside? No, as the current situation is like 1957, when SPX broke back up into a lower high last year and then broke down again this month. It is main resistance here though while we are in this bear trend / market, and if we see a break back above it, currently at 2007, then that would strengthen the case that a significant low has just been made, though I think it is unlikely that any really significant low leading to sustained new all time highs can be made without at least a test of rising support from the 2009 low, currently in the 1750-60 area.

Yesterday SPX rallied to my 1890 trendline target, failed there from a rising wedge formed from Wednesday's low (posted on twitter as the move was peaking), and then retraced 38.2% of that wedge. I posted on twitter as that reversed back up that this was potentially the start of a new bull move up and that that is what we have seen. Where will that move end is the question for today.

I posted the volume spikes on the daily SPX chart yesterday morning showing why at least a short term low might be forming or already have been made. That is looking pretty good on the action so far this morning. For today there are two obvious IHS options and at the time of writing SPX may well be going with option 1, with an IHS target fixing in the 1970 SPX area. If SPX sees sustained trade over 1900 this morning I'll be expecting that to play out, with a possible fail area in the 1950 area where I have a potential larger IHS neckline. On a sustained break back below 1850 from here we could see a retest of Wednesday's low at 1812 and possible continuation lower. SPX 15min chart:

Short Term Swing Low May be In

Today is a cycle trend day, which means that there are 70% odds that either buyers or sellers will dominate the day. That doesn't have to be a full trend day, but often will be. On this pattern setup, if bulls can sustain trade over 1900, then we may well see a trend up day. Trade carefully today and everyone have a great weekend. :-)

Source: Springheel Jack

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