Looking at ES the retracement from the high on Monday is most likely still ongoing, though there is clear positive divergence on the 60min RSI warning that it may not go much lower. The reversal at the 50 hour MA overnight kept ES on the bear side of the MA, and if the retracement continues today the obvious target is the weekly pivot at 1796.20, which should be strong support as the daily middle bollinger bands on both ES and SPX are in the same area. I have the retracement pattern as a 70% bullish (ultimately) falling wedge and I have wedge resistance just over 1805. The main bull/bear line for today is at 1808 as that was the overnight high. ES 60min chart:

Ongoing Retracement

On the SPX daily chart the middle bollinger band is currently at 1795.41, and if we see a break up today the upper bollinger band is at 1816. SPX daily chart:


Yesterday was a tedious day that didn't go far or decide anything. I'm still leaning bullish but short term ES is retracing after established negative 60min RSI divergence yesterday. I have a small double-top target at 1801.5 and have key support around the weekly pivot at 1796.20. This is the level below which the bear case will start to look interesting again. ES 60min chart:

No Firm Direction Yet

In terms of that bear case, in the shorter term the bears have a possible double-top in place now and that would target the 1744 area on a clear break below last week's (valley) low at 1779.09. 65% of possible double-tops never make it back to the valley low (or trigger level), and of those that do, a significant number fail just after breaking below it. We'll see. SPX 60min chart:


I posted a chart on twitter on Friday evening showing the move up from the lows last week, and showing the strong setup there to retest the highs today. The low on Friday morning retested the break over a double-bottom targeting the 1814 area, and by the close a rising channel from the lows had formed on SPX. While that rising channel holds I'd expect a retest of the highs by lunchtime today, as the channel support trendline is rising an impressive 18 points per trading day. If it breaks down then the double-bottom remains a strong setup as long as Friday's low at 1796.81 holds. SPX 1min chart:

Advantage Santa

On the daily chart Friday's move up was a strong reversal at middle bollinger band support. The next obvious target is the upper bollinger band which is now in the 1816 area. That obviously supports the double-bottom target on the chart above. SPX daily chart:


The NFP figures this morning were a decent beat and the US unemployment rate is now back down to 7%. Even though the Fed is clearly very gun-shy about tapering they may well feel that if they still don't taper now then they will lose a lot of their remaining credibility.

Will tapering actually matter much? In perception terms perhaps, but if QE is reduced by a few billion per month one has to wonder how much practical difference that would make. There is still likely to be a lot of QE coming into markets for quite a while yet regardless.
For today the bull and bear scenarios that I put forward yesterday are still both in play. On the bear scenario a slightly upsloping H&S is forming and the ideal right shoulder high would be in the 1802.5 SPX area today. On a move over 1805 this scenario would become steadily less likely. SPX 60min chart:

Two Chart Post

The bull scenario is that a sustained break over 1799.80 will trigger a double-bottom target in the 1820 area, and we may well see a gap up over 1799.80 at the open which would be suggestive of a gap and go trend up day setup. SPX 15min chart:


SPX tested the daily middle bollinger band hard yesterday but closed above it.

My main target support level is at the daily lower bollinger band and to make that is going to require a close below the middle bollinger band, ideally this week but possibly as late as next Monday. Meanwhile this area is an important inflection point and I have both bull and bear scenarios in play here. SPX daily chart:

cp 12-5-13

The bull scenario here is that the low yesterday completed a 50% fib retracement of the move up from 1746. On a sustained break over yesterday's high at 1799.80 SPX a decent falling megaphone would break up with a target back at the highs, and a larger W bottom would break up with a target in the 1820 area, very close to the daily upper bollinger band at 1819.5. This isn't my preferred scenario but it is very much in play and a sustained break back over 1800 should be respected. SPX 15min chart:


I'm going to have a quick look today at the trendline and bollinger band backdrop to the retracement this week.

At the high last week a tentative rising channel has now been established from the October 2011 low. This is important because as long as this channel lasts the next obvious move will be to test rising channel support, currently in the 1575 area. It is also important because since the October 2011 low two large rising wedges have formed and broken up with targets in the 1930-65 area, but if this larger rising channel holds then both of those patterns and upside targets will be superseded. That's not to say that SPX wouldn't reach those levels later in any case, but those targets would no longer be active pattern targets.

There are two important trendline support levels on the way back to channel support, and the first is at the retest of broken resistance on the rising wedge from the June low at 1560. That is currently in the 1755-60 area and is a decent fit with the daily lower bollinger band, currently at 1754. If that level is taken out with confidence then that rising wedge target will be greatly weakened and a path would open up to the second trendline support level which is rising support from the 1560 low, currently in the 1690 area. SPX daily chart from October 2011:

Trendline Overview

On the shorter term daily chart the low yesterday tested the daily middle bollinger band and it's possible that this retracement could fail there. If so then we would now see a break back up towards the daily upper bollinger band, currently at 1820 but until we see a break back over the weekly pivot on ES at 1805.1 I'm expecting more downside, with the obvious target at the daily lower bollinger band, currently at 1754. SPX daily chart:


I've been in Dubai over the holiday weekend and this morning I was taking this photograph from the observation deck on the 124th Floor of the Burj Khalifa (Khalifa Tower), which is the world's tallest building. There was quite a view and this was my favorite photo in part because the sun was behind and you can see the shadow of the tower cast over the comparatively tiny structures below:

looking down

SPX too is looking a bit toppy this morning and the late plunge on Friday has me expecting that we will see more weakness this week. The areas that I will be watching today are the possible H&S neckline at 1800 and rising support from 1746, currently at 1797. Until the latter is broken I am expecting to see retracement this week but won't be taking it for granted. SPX 60min chart:


I'm packing for the long weekend and travelling today, and many others will be doing the same, so volume into the end of the week is likely to be feeble. I will just post one chart today and this will most likely be my last post until Wednesday 4th December, though I'll most likely post the odd chart on twitter between now and then.

The main thing to watch today is the bear setup on SPX, which may or not play out obviously, but will command attention if SPX can take out yesterday's intraday low at 1800.77. The smaller double bottom marked would target the 1793 area on that break, and a test of rising support from 1746 in that area. If that were to break then next serious support would be at 1777. On a break below 1777 the larger double-top would trigger with a target in the 1746 area for a full retracement of the latest move up. SPX 60min chart:

Packing for the Weekend

I've mentioned a few times that the punch over the weekly upper BB on Friday 15th November should deliver a 4% retracement starting soon, and I have a decent looking topping setup right here as it happens.

On the SPX 60min chart that is a possible double-top at the high yesterday that would target the 1746 low (and possible H&S neckline) on a break below the last low at 1777.23 SPX. It may not deliver, or we may see another retest of the highs before it delivers, but this is a nice and classical reversal setup after last week's break below rising wedge support from the 1646 low. It's worth mentioning as well that 1746 would be an almost perfect 38.2% fib retrace of that move up from 1646. Just sayin '. SPX 60min chart:

Looking for Retrace Soon

Looking at ES there is obviously a possibility that we may see a retest of the highs before any short term high is made. If so I'd be looking for reversal there. If the short term high has already been made then I'd be seeing a break below yesterday's low at 1798.5 ES as confirmation that the short term high is in. ES 60min chart:


Back on the 30th June, with SPX at 1606, I did a weekend post arguing the case for a move to a rising wedge target in the 1965 area. You can see that post here.

That target looked ambitious then but as SPX has since risen over 200 points into the likely opening print today, that target no longer looks particularly ambitious. From a pattern perspective the only thing that would negate that target would be if that wedge turned out to be part of a larger pattern, and the only likely pattern would be an overall rising channel from the October 2011 low. There are a couple of possible alternates for that trendline but the ideal and highest trendline target would deliver a perfect rising channel, and that target looks to be in the 1810 area today. Here is that channel on a chart showing the major patterns formed since that October 2011 low. SPX daily chart from October 2011:

Big Inflection Point Week

SPX close within two points of both the weekly and daily upper bollinger bands on Friday, so I would count that as a close on both bands. In the event that we see a strong week on SPX this week,l and that SPX can break above strong trendline resistance in the 1810-12 area, then I have the maximum closing range for the weekly upper bollinger band in the 1815-20 area this week. SPX weekly chart:


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