On the FOMC stats I was looking at last week, of the four similar instances since the start of 2010, and of the three of those that topped in the next few days, one topped on the Monday afterwards, and the other two topped on the Tuesday. If we are to see that intraday high today my target range is in the 1965-70 area and that would respect resistance on the primary rising channel on my weekly chart below. SPX weekly chart:

One Last Push

The daily upper band is now at 1970. With the close yesterday at 1962 that shouldn't close higher than 1973 today and we might see a close enough intraday hit to be a visual hit of the upper band. SPX daily chart:


SPX punched over the weekly upper band again on Friday for the second punch above the band in the last three weeks,. I don't want to overemphasize this as a topping signal, but it goes without saying that these punches tend to happen when SPX is looking rather overbought, and on the four previous examples that I have marked on the chart below from the 2011 low, none rose significantly further before a consolidation or retracement period lasting four weeks or more. This would not generally be a place to look for a strong push upwards.

In terms of the primary rising channel, the high on Friday at 1963.91 was just short of my 1965 wedge targets, and was a test of primary rising channel resistance. I had a look at this using the thinnest possible trendlines over the weekend and there is very little play left in the trendline. Even a move to 1970 now would risk breaking it. SPX weekly chart:

The One That Got Away

So what if the primary rising channel does break up? It's rare but it happens, and I'll be showing you a very good example where it has happened before at the bottom of today's post. If it breaks up then my conservative target for SPX will be the wedge turns channel resistance trendline that is currently in the 2010 area. If that doesn't hold then the full target for the rising wedge from 1737 breaking up would be the 2160 area. SPX daily chart:


I just wanted to talk for a moment about conviction bulls and bears today. I'm not one to disparage anyone's religious convictions, but that being said, it is a firm rule that any genuine chartist will consider the price data before forming any conclusions from that data, and those conclusions will always be a matter of relative probabilities, never absolutes. Any chartist who doesn't do that isn't a chartist at all. What they are is something between preachers and public entertainers, without either the long term incentives offered by the first, or the amusing antics of the second. There are a couple of quotes that say this better than I can:

'The fundamental cause of the trouble is that in the modern world the stupid are cocksure while the intelligent are full of doubt' - Bertrand Russell

'The best lack all conviction, while the worst are full of passionate intensity' - WB Yeats

Reasoned analysis can generate opinions, but never faith. Very strong convictions in financial analysis are warning signals that you are reading something written by either a charlatan or a fool. For those suggesting that I am a permabear here, and also those suggesting that I was a permabull a year ago, I offer the following wisdom attributed to Denis Thatcher :-)

'Better keep your mouth shut and be thought a fool, than open it and remove all doubt'

On to the markets where the +3 close yesterday has lined up this week's FOMC stats with the only three other examples going back to 2011 where there was a decent gain on FOMC day followed by a green close of more than a few ticks the next day. As I mentioned yesterday all three previous examples were no more than three days before each of the only three retracements over that period that exceeded 10% from intraday high to low.

I ran this back to the start of 2010 and picked a fourth example that was from the FOMC meeting before the fourth 10%+ retracement this decade, but in that case SPX ran up another fifty points over five weeks weeks to make that high just before the next FOMC meeting. I'd take this signal as strongly bearish and a signal that a significant top is close, but there are no certain outcomes and no family farms should be mortgaged to position short here.

I was asked yesterday what the obvious target would be for a retracement here and the obvious target would be primary channel support on my weekly chart below ...... as long as that channel remains unbroken. That is currently in the area of the 1737 low, which is also a possible larger H&S neckline area. To open up any lower targets the channel would obviously then need to break down, but I wouldn't be assuming that would happen.

The close yesterday was 3 points over the weekly upper bollinger band. That weekly candle fixes today as it is the end of the week, and if we can close at or over 1965 today that would both make the two wedge targets there, and should also deliver a punch close above the weekly band, which would be another decent topping signal.

SPX weekly chart:

The Importance of Not Being Earnest

On the daily chart I have a possible target above at the daily upper band, which on a strong day today I'd expect to close in the 1970-3 area. SPX daily chart:


I've been hearing a lot this week, and particularly with the break up yesterday that we have moved beyond an area where TA can help forecast the markets. I have to say the evidence for that right here looks pretty thin. I said in my post last Friday that SPX might well retest the highs unless the 50 hour MA held as resistance. In my post yesterday morning I noted that SPX had broken back over the 50 hour MA and showed a rising wedge from the 1925 low, giving my reasons why I thought that wedge might well break up with a target in the 1960-5 area rather than break down. Yesterday that wedge broke up with a target in the 1965 area, and that joins the 1965 target that I gave almost a year ago in my weekend post on on 30th June 2013 after the break up from a much larger rising wedge. So far at least we have not demonstrably moved out of predictable territory.

Nonetheless I was much cheered to read this, and watch the hugely bullish comments on twitter. It seems likely that complacency about equities has now reached even beyond the high levels achieved at the 2010 and 2011 tops, which is really very impressive. Any charts or comments I post on twitter suggesting that this market might retrace anyway soon are losing me followers and that's just as it should be here.
Of course massive complacency of itself isn't enough to signal an imminent top. I posted a checklist on twitter last night that covered a few more important things that I like to see and we have them all here now:

The Sheep Look Up

Now this doesn't mean that there must be an imminent high here and this could still break up. Overhead resistance looks very strong though and I have that in the 1965-70 area today, possibly getting as far as 1975 on a stretch. As long as SPX stays under that we should be making the second high of a double-top here:

The Sheep Look Up

Only the one chart today as I was crunching numbers last night and will devote the rest of the post to the results of my research. What I was looking at was FOMC days since the start of 2011 and what happened the following day. I was looking particularly at FOMC days with decent green closes, which I took as a close more than five points up.
There were ten previous examples of these since the start of 2011 and the results from those were as follows:


The first chart I posted on twitter yesterday afternoon, and it shows the rising wedge on the SPX 5min chart. This overthrew twice before the close and although this is a 70% bearish pattern targeting a retest of the lows on a break down, it may be that this one is going to take the 30% odds route and break up with a target in the  1960-5 area. SPX 5min chart (Tuesday PM):

Can't Get The Help

There is a matching rising wedge on ES, with the support trendline in the 1927/8 area this morning, and one way or the other I suspect strongly that this wedge will break out today. ES 60min chart:


Yesterday was another day just chopping around while we wait for this consolidation to finish. We have been seeing higher highs and lows, which seems bullish until you remember that a typical bear flag forms against the trend, and trends sideways to up. Both SPX and NDX have been doing that under their respective 50 hour MAs and until the break back up over those my working assumption is that we have been watching bear flags forming.There is a decent chance that we will see a break either way today from this consolidation. SPX 60min chart:

Looking at Bond Yields

There's really not much else to say on equities today so I'm going to look at other things. Firstly on TNX I have two nested double-tops in play short term and if we see a break below 25.79 then I'd be expecting those to carry TNX down to test falling wedge support, currently in the 23.70 area. TNX 60min chart:


Friday was more bullish than I expected but resistance at 1937 held on repeated tests and if we are to see an opening gap today, then it seems likely at the time of writing that it will be a gap down. The SPX 50 hour MA is now at 1939 and is still primary resistance. In the event that is broken then main rising wedge resistance is in the 1947 area. I'm expecting more downside today however.

I think this retracement may develop into something substantial if the bears can develop some momentum, and we'll see whether they can. At minimum though I'm looking for a test of the SPX daily middle bollinger band, which closed yesterday at 1918, and that target could be hit today. This is a target that is often pinocchioed intra-day, so it's important not to read too much into a break below it unless that persists into the close. SPX daily chart:

The Daily Middle Band

In the event that the daily middle band is broken, then the next trendline target is channel support in the 1903 area, and below that the 50 DMA at 1889, and main rising wedge support in the 1882 area. If SPX should reach rising wedge support then the overthrow at the last high means that rising wedge support may well break down at the next test, opening up targets further down. SPX 60min chart:


Yesterday finally saw a decent decline on SPX and a considerable amount of technical damage was done. On the daily chart SPX broke back into the rising wedge and the next decent support level is the daily mid band in the 1915 area. SPX daily chart:

Teddy Bears' Picnic

On the 60min chart SPX broke below the key 50 hour MA with confidence and should be heading for a test of rising channel support from the 1814 low, currently in the 1900 area. Bears would need to break that to open up the test of the 50 DMA and rising wedge support in the 1883-7 area. SPX 60min chart:


SPX confirmed the rising support support trendline from the 1862 low area yesterday morning and then broke down through it. A little double bottom setup developed yesterday afternoon that suggested a possible retest of the highs, but the overnight action has not been promising for that playing out. SPX 15min chart:

Distant Drums

NDX has finally fallen away from rising channel and smaller rising wedge resistance, and broke rising wedge support yesterday. There is a slim chance for bulls that this might be a bullish wedge underthrow, but the chances are that this rather bearish looking chart is just doing exactly what it appears to be doing and breaking down short term. NDX 60min chart:


I'll be looking at alternatives for my shorter term charts today, mainly in case this outage at Stockcharts becomes a regular thing, but in the interim this is going to be a shorter and narrower post than usual.

First the weekly chart with my rising channel from the October 2011 low. I was getting concerned last week that this very strong push up might break it, but it has held well so far, and I'm not expecting it to be broken. The next obvious target is rising channel support, currently in the 1730 area, and I'd note that there is a possible H&S neckline level in the 1737 area. SPX weekly chart:


On the daily chart Monday was the eleventh day of the daily upper band ride. Yesterday fell away from the upper band and I'd be very surprised to see that resume today, as eleven days for this upper band ride is already the longest of 27 examples in the last five years. If we see a decent retracement, and this looks a promising start, then the important support levels are first broken rising wedge resistance in the 1930-3 area, then the daily middle band in the 1910 area, then the 50 DMA and rising wedge support in the 1800-5 area. SPX daily chart:


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