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SPX declined modestly yesterday, bottoming out at 2001, just above the 1995-2000 target range I posted in the morning, and has recovered strongly overnight. As I said yesterday I'm not seeing anything to strongly suggest a high here and am looking at trendlines in the 2040 and 2060 areas for resistance. If we see a break below 1992 today I may reconsider that view. SPX daily chart:

In Between Daze

The 60min chart is leaning somewhat bearish. There was a trendline break yesterday and the first break below the 20 hour MA since the 1860s. Main support on the 60min chart though is the 50 hour MA at 1992. That hasn't been tested since 1890 and is main uptrend support. I'm not seeing a pattern setup here yet that strongly suggests that the wave up is finished or finishing. SPX 60min chart:

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Another new all time high yesterday with an indecisive daily candle. There were quite a few calls for a wave high yesterday at the close yesterday and there is a case for that, but that's unsupported so far by any negative divergence on the daily RSI 5 or NYMO area, so it's a definite maybe. If we don't see a break under the 1985 area, I'm looking for trendline targets in the 2040 or 2060 area to be hit before any big reversal. SPX daily chart:

US Dollar Breaks Up

The SPX 60min chart is open to the short side here. The low yesterday established a new support trendline that may break at the open, and there is significant negative divergence on the 60min RSI 14s on most US indices. A strong push down today could trigger sell signals on these. SPX 60min chart:

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The rising wedges on Dow and SPX broke up on Friday after the BOJ QE expansion and held that break into the close. There is no longer any negative RSI divergence on the 60min chart and there never was on the daily, so at the moment there is no active reversal setup here on Dow or SPX. Dow 60min chart:

Monthly Hanging Man Candlestick

If we see a continuation up then I'll be watching the main resistance trendlines from the October 2011 low. The best pattern from that low is on Dow, not least because the October low was a test of pattern support, and that is a rising channel with channel resistance in the 18100 area. Dow weekly chart:

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Well we looked very close to a high at the close yesterday but with the gap over strong resistance likely at the open we could see an extension further upwards. On a sustained break over the rising wedge resistance trendline on Dow then we are forming a new pattern that is not yet clear.
 
The same applies on SPX. Dow 60min chart:
BOJ Bombshell
So where is resistance? There is resistance at the current all time high at 2020, and the daily upper band which may well be hit in the same area near the open. That could be a wave high, but more likely we would see a retrace shortly and at least a test of the highs. SPX daily chart:
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One reason I do my optic run views on my seven main US equity indices is because while SPX is often the technical leader, by which I mean not that it moves fastest, but that it is delivering the cleanest trendlines/patterns and fibonacci retracements, that is not always the case. That leader at the moment is the Dow Industrials, and my first two charts will illustrate why that is.

The rising wedge on SPX that I tweeted on Tuesday night hit the very well defined wedge resistance (tweeted at the high yesterday) and then broke down on the frankly very predictable not really news that QE3 had ended in October as planned, and the usual assurances that the Fed would be fighting hard to keep interest rates near zero until the stars fall from the sky. Now those of you who have been looking at my work closely for a while might have wondered why I was giving strong weight to a pattern on SPX that was mediocre due to the poorly defined support trendline, and the answer to that question is of course that .......... SPX 15min chart:

The Flagging Dow Industrials

....... it was supported by a far better and directly equivalent pattern on the current technical leader index, which is the Dow. The pattern on Dow is very well formed, overthrew slightly at the high yesterday, and then broke down and retested broken wedge support at the close. At least the main part of this move up from the 1820 SPX low is over, and that overall move may well have topped out, though if so then we may well retrace, retest highs, then retrace more as part of the usual formation of a decent sized H&S or double top.  Dow 15min chart:

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SPX broke strong resistance levels at the 50 DMA and the 1976-8 levels yesterday to close at a very impressive 1985. That break up over the 50 DMA opens up the daily upper band as a target and that closed yesterday at 2003. With FOMC today it seems unlikely that Yellen can say a great deal to cheer the markets, QE3 has ended and is unlikely to be even temporarily revived, and the Fed has made so many soothing noises about future interest rate rises already that it's hard to see what they could add to that. Nonetheless some more soothing noises today might just get SPX to that target at the upper band. SPX daily chart:

USD Dollar and FOMC Today

The structure of this move up has been unclear since 1950, when the initial rising wedge from the low broke down but failed to deliver more than a small reversal. SPX finally established a new support trendline yesterday morning and so I now have a larger rising wedge from the low. We could see an overthrow as high as the daily upper band today if Yellen manages to come up with something to say to give SPX a boost. SPX 60min chart:

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I was talking yesterday about the 1976 SPX target and the trendline resistance that may well be there. SPX is likely to gap up today and we will see whether that target is hit today and if so, whether the trendline holds. SPX daily chart:

1976 and Bust?

Supporting that 1976 SPX target is a triangle that formed on the SPX 1min chart yesterday. It made a false break down, as triangles often do, and is now resolving up towards the target, which is also at 1976. SPX 1min chart:

1976 and Bust?

What will happen at that 1976 SPX test? Hard to say but a look at foreign indices suggests strongly that there may be another strong wave down starting shortly. Whether that would have the strength to carry SPX past the 1820 low from here is debatable of course. DAX weekly chart:

1976 and Bust?

I haven't posted a USD chart in a few days. The obvious next target is still a retest of the current high before a larger pullback. USD daily chart:

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SPX closed the week on the weekly middle band at 1964. This is a very significant resistance level and the key thing that bulls would like to do this week is to break back above it. Only the weekly close matters for this so we could see SPX trading above it intra-week without that being a bullish break. SPX weekly chart:

Flags and Double Reversals

I've been giving some thought to the circumstances in which we could see the IHS target in the 1976 area made this week, and it would be very close indeed to possible falling channel resistance from the high. On the bigger picture this would be a bull flag channel of course, SPX daily chart:

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SPX broke above the daily middle band yesterday and tested the 100 DMA. More importantly though, the high yesterday was within a couple of points of testing the weekly middle band. Given that today is Friday that may well be formidable resistance today, and while I'd quite like to see a test of yesterday's high today, I'm very doubtful about seeing a move significantly higher. This is closing resistance, so only the closing price today is important for that. We could see a move somewhat higher intraday. SPX weekly chart:

The Air Is Getting Thin

So what about all the patterns that broke down on Wednesday? They are all still in play here, and I'm showing the patterns from the lows for SPX, Dow, TRAN, RUT and NDX below to show where they all stand as at the close yesterday.

SPX formed a rising wedge that broke down on Wednesday and brutally retested broken rising wedge support yesterday. There is a decent looking double top setup here, and if we can see enough confirming weakness today the strong negative divergence on all the 60min RSIs on these five indices may trigger strong sell signals. This is not a chart I would see as in any way an attractive long here. SPX 15min chart:

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At the point where SPX broke hard through the 50% fib retrace the overall trend shifted from bear to unknown in my mind, and it's still in unknown territory now. I'm not assuming that this will resolve in either direction until I see some stronger evidence, but I'll be calling the shorter term likely moves, which at the moment look a decent fit with either bull or bear overall trend.

Looking at the pattern setup at the close yesterday, and the recovery overnight, I have a new educated guess for the direction on SPX over the next few days. I'll lay that down here and we'll see how that goes.

  1. We see a retest of yesterday's high or a marginal new high today to make the second high of a short term double top
  2. SPX then (38.2% fib) retraces to retest the 1900 area and the 200 DMA just above at 1907
  3. SPX then moves up further to retest the 50 DMA in the 1967 area and possibly make an IHS target at 1976
  4. At the test of the 50 DMA we see whether SPX fails hard there into at least a retest of the recent lows, or breaks higher into new all time highs


SPX daily chart:

Another Educated WAG

Every one of my seven US optic run indices broke rising support from the lows yesterday. I'm looking for reversal patterns to form and then fib retracements of this move up from the lows across the board. The stall at this area on SPX is close to the 61.8% fib retrace target. SPX 60min chart:

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