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The SPX daily RSI 5 closed the day over 60 yesterday so the bears now get a shot at turning this round at strong resistance in the 1948-56 range. History still isn't encouraging for that, as only two of the last seventeen of these buy signals back to 2007 failed in this area, but it could happen. A reversal here might still just be a retracement however and would not necessarily lead to new lows. SPX daily vs NYMO and RSI 5:

Testing Serious Resistance

The resistance range here starts at the test yesterday of broken rising wedge resistance at 1948, continues through the daily middle band at 1953, and ends with the 50 DMA at 1956. If bulls can deliver a a decent close over 1956, then I'll be looking for the retest of the highs. SPX daily chart:

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This is going to be my top chart every day until the daily RSI 5 hits 60. Over the seventeen buy signals from this chart back to the start of 2007, fifteen made the signal target at the 70 level on the daily RSI 5 and the two failures both failed above the 60 level. As ever there's no guarantee that this time won't be different, but the short side is very low probability historically until the daily RSI 5 hits 60, at which point shorts will be upgraded to just low probability until it hits 70. The RSI 5 high so far on this move is just over 50. SPX daily vs NYMO and RSI 5:

Now We See

On the daily chart there is some resistance in the 1950 area at broken rising wedge support but the main short term target is double resistance at the 50 DMA and middle band at 1955. Bulls need to get back over those levels to regain control of this market. If we are to see a reversal back down then the chances are that it will be at that test. SPX daily chart:

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The first thing to say today is that even on the bear rally scenario, the chances that the rally high was made yesterday are small. That's because of the seventeen similar buy signals from the start of 2007, only two failed to reach the 70 level on the RSI 5, and both of those failed just over 60. The RSI 5 closed at 51.85 area yesterday and I am therefore assuming that SPX will test main resistance at the 50 DMA and the daily middle band sometime in the next three days. Those are both currently at 1956. SPX daily vs NYMO and RSI 5:

Two Obvious Paths to 1956

There is a slightly lower target as well at broken rising wedge support in the 1950 area, but I'd expect SPX to go through that to test the 50 DMA and daily middle band. SPX daily chart:

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The long setup I was looking at on Friday morning triggered on Friday so the daily lower band ride should be over and I'm looking at upside targets. The main target I'm watching is not an SPX level but the 70 level on the daily RSI 5. The RSI 5 closed on Friday at 47, and I'd expect to see a rally of at absolute minimum to the 50 DMA to make this target. Of the last seventeen of these from the start of 2007, only three retested the lows before making my RSI 5 target at 70, and two failed in the 60 area before going on to new lows. This is a strong buy signal. SPX daily vs RSI 5 & NYMO:

Buy Signals Triggered

On my standard daily chart I have the obvious first resistance levels at broken wedge support in the 1950 area, and then the 50 DMA and 1955 with the daily middle band at 1958. My feeling is that we will at minimum test that 1955-8 target, and will most likely retest the highs after that. Only nine of the last seventeen signals went directly to new highs, but that is nine of the last twelve signals since the 2009 low once I strip out the previous five, and one of those three tested the previous high and failed there making the second high of a double top. SPX daily chart:

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I am looking very hard for a significant low in the next day or three, and for those wondering why that is while reading this post I refer you to the last chart in this post and the associated stats with the current daily NYMO/RSI 5 setup.

Bulls had a shot yesterday morning and blew it badly in short order. SPX closed on the daily lower band for a second day, and that was the sixth day of the current ride down the daily lower band. If the downtrend continues then I'd expect the lower band top close in the 1900-3 area today.

What was significant yesterday is that support in my 1911-4 range broke, and SPX closed four handles below the 100 DMA. If that follows through then the next big support level is the May lows and the 200 DMA in the 1862 area, though there are a series of smaller levels between of which the strongest is at 1883/4. SPX daily chart:

Searching for Buried Treasure

The tell for the bull fail yesterday morning was that RUT failed to confirm the SPX gap over trendline resistance. I think it's clear that RUT has now evolved into a 68% bullish falling wedge and I have redrawn the trendlines with channel support as secondary support. After the fail at falling wedge resistance yesterday RUT then broke short term rising support which is suggesting that the next move is to test falling wedge support again. We may see another spike down after a morning high today. RUT 60min chart:

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Yesterday was cautiously promising for a reversal at the inflection point here. The two lows this week are at 1913 and 1911, both in the 1911-14 strong support target area that I was looking at on Friday morning. We have a possible double bottom in place if the decline patterns can be broken. If the decline patterns can't be broken then yesterday was day five of the daily lower band ride and it could run down longer and further. SPX daily chart:

Inflection Point Tests

Bulls had a shot at breaking the falling megaphone on SPX yesterday and strengthened the resistance trendline with a third touch. If that breaks then yesterday's low should be good and I'd be looking for a test of Monday's high at 1942 SPX and double bottom resistance there. SPX 15min chart:

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I identified the rally pattern from Friday as a 70% bearish rising megaphone after the AM low yesterday and posted that on twitter. Hopefully everyone caught that. After the megaphone broke down in the afternoon there was a swift move to make the full SPX double top target at 1914, and to test the weekly middle band, also at 1914, and the 100 DMA at 1912. That is a strong support area and it held yesterday in trading hours, though given the weak overnight action it could break at the open today. SPX weekly chart:
Double Top Target Hit
The question now is whether there are decent prospects for a low around this level, and the picture there looks mixed so far. On the bull side support at 1914 held well yesterday with a low at 1913.77 SPX. There is a possible double bottom in play here now and encouraging positive divergence on both the daily RSI 5 and the 60min RSI 14. On the bear side there was no real rejection at the low yesterday and the low was taken out with some force on ES overnight. While the rising megaphone target was made at the retest of the lows, in this context it may well be a bear flag pointing lower. The retest of broken rising wedge support at the high on Monday is also suggesting lower. SPX daily chart:
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SPX broke back above the daily lower band yesterday and delivered a 27 point bounce from the lows, before giving much of that back overnight. There are arguments both ways for direction today. The arguments for the short side are that the 60min RSI 14 reached 50, which is a natural reversal level and the obvious level to reverse at to deliver positive RSI divergence at a retest of the lows. The falling channel on RUT also argues for a test of the lows next. I have two bull/bear levels that I'll be watching today carefully in regular trading hours (RTH) and those are the 1925 ES level (1930 SPX area) at the ES 50 hour MA, and the SPX daily lower band at 1934.

For the moment SPX is still riding the lower band down, but the lower band is no longer strong resistance after being broken yesterday. If SPX can break back above the lower band again today then there is an obvious target above at the 50 DMA at 1954. If SPX can't break back over the lower band at 1934 then the double top target at 1914 may well be tested, and key support for today would be at the weekly middle band and the 100 DMA at 1911/2. SPX daily chart:

Leaning Long

The short term pattern setup has me leaning long assuming that the open this morning avoids building on the overnight weakness. I have a decent looking falling channel on SPX that would allow a test of the 50 DMA within it, and an open double top target in the 1947/8 area, which would deliver SPX close to that test. For this scenario SPX needs to avoid spending much time under broken double bottom resistance at 1932 this morning. SPX 15min chart:

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The first thing to say this morning is that short term the bears own the SPX chart until demonstrated otherwise. There are no strong reversal signals here yet and SPX is riding the lower band down, with a very telling hit of the SPX daily lower band from below as resistance at the high on Friday. The lower band is now at 1938 and that may hold again as resistance today. If a bounce clears that resistance, and broken rising wedge support in the same area, then next strong resistance is at the 50 DMA in the 1953 area. SPX daily chart:

Riding the Lower Band

That said, a retest of Friday's low, and ideally a slightly lower low to hit the full double top target at 1914 would look cautiously bullish and should establish the 60min positive RSI divergence that is currently absent. Strong support is just below the 1914 double top target at the weekly middle band at 1912 and the 100 DMA at 1911. I'd expect at least a decent bounce from a test of of this area. SPX weekly chart:

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Last time I was looking at EURUSD I said that I was expecting a test of rising wedge support in the 1.35 area. EURUSD made that and then slightly lower to test the 200 DMA, so the rising wedge is now broken. Unless we see a fairly fast recovery to new highs I'm now looking at targets for EURUSD in the mid-120s. I've been watching this setup for months in the expectation that there should be a strong USD rally at the end of QE3 so I'm expecting this to resolve down. EURUSD weekly chart:

Other Markets Update

I've had a look at my May projection for TLT and have adjusted that for the rising channel that has since been established. The obvious next target is channel resistance in the 117.5 to 119 area, depending on the time taken to reach that rising trendline. TLT daily chart:

Other Markets Update

Oil has retreated sharply recently and may retrace a bit further. Overall though I have USO in a rising channel from the 2012 low, and my overall bias remains bullish, with the obvious bigger picture target at the 2012 high at serious resistance just over 42. I have a possible retracement target in the 35.5-36 area, which should match up with CL support in the 97/8 area. USO daily chart:

Other Markets Update

The overall picture on silver looks bullish, with a possible double-bottom forming and declining resistance from the 2011 high broken. Short term though the RSI setup is bearish and silver is currently making lower highs and lows. The next obvious target is under 18.61 and may retest broken declining resistance from the 2011 high in that area. Silver daily chart:

Other Markets Update

 

Source: Springheel Jack

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