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Bulls beat the stats and repaired a lot of damage yesterday, closing with a clear break above the 50 hour MA. If that turns into support then the path is clear fora retest of the highs. If SPX makes a new high with any confidence then the next upside target would be rising wedge resistance in the 1930-40 area. SPX 60min chart:

Only Uncertainty is Certain

How would a 1930-40 target fit with the SPX weekly chart? Reasonably, rising channel resistance from the 2011 low has already been tested twice without a return to test channel support, but while a third test is rarer, it is far from unknown. Primary rising channel resistance is also currently in the 1930-40 area and is rising at about 15 points per month. SPX weekly chart:

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I was saying yesterday morning that the bears needed a fast and hard rejection at the SPX 50 hour MA, and that's exactly what we saw. That was a serious bull fail, but they could still repair the damage by breaking back over the 50 hour MA with confidence, and that closed at 1883.30 yesterday. SPX 60min chart:

Significant Bull Fail

On the daily chart SPX broke back down below the middle band, which was bearish. The last two times that there was a candle setup like the last two days (first day break through band with confidence, second day strong rejection and break back through the middle band with confidence), the rejection followed through hard on the third day in the direction of the rejection. That leans bearish today and the bears have another shot at breaking support in the 1850-60 zone at double top support at 1859, rising support from 1737 in the 1855 area, and the late April low at 1850. SPX daily chart:

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SPX broke back over the daily middle band yesterday, and bears need a swift reversal or the next obvious target will be a test of the daily upper band, now at 1896.5. SPX daily chart:

Bear Necessities

That wasn't main resistance here however. What I've been looking at for that is the SPX 50 hour MA, which was broken slightly at the close yesterday with the close two points above it. If bulls can follow through and turn the 50 hour MA into support, the next obvious target will be a retest of the high, and on a conviction break above that, a test of rising wedge resistance, currently in the 1930 area.

Bears need a swift reversal here to start the next leg down. A break below the 1859 low and then the 1850 low will open up the downside. SPX 60min chart:

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For the second week the weekly candlestick on SPX was a long legged doji. These are indecision candlesticks, but don't give any clues to direction as the breakout direction is random. If we see a break up then the weekly upper band is currently at 1903.6, close to a retest of the current high, and on a break down the middle band is currently at 1845, slightly under rising support from the 1737 low. SPX weekly chart:

Middle Band Retest

On the SPX daily chart the rally on Friday afternoon retested the daily middle band, and the close just just underneath it. A break with a daily close more than 4 points back above the middle band would be bullish. Worth noting here is the now very narrow daily bands, which is telling us the we are likely to see a move start shortly that will hit an outside band and then rise the band in a powerful; move for several days. The last similar pinch was in January and was resolved in the fast move down into the 1737 low. SPX daily chart:

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The decline yesterday was dramatic, but not sufficiently dramatic in my view that we should now assume that the spring high was made on Tuesday. Bears will need to follow through and close below 1850 SPX before that assumption can reasonably be made.
I'm just looking at SPX and bonds today but I will just mention that the low on RUT yesterday was at 1082.53, still in the lower range I gave yesterday morning for a possible bullish recovery, and that NDX didn't break rising support from 3414, though it came very close to testing it. There is a strong argument that this decline has limited the scope for further upside however, and if we should see a strong recovery from yesterday's lows then I would mention that something often seen at significant highs is a sharp spike down before the main slightly higher high. This is a common way to set up a double top.

On the SPX 60min chart the 50 hour MA was broken yesterday morning and then the breakaway gap at 1878-80 was filled. That kills off the idea that a new impulse move upwards had started with that level as the breakaway level for the move. The next level of support is the last low at 1859.79, and then rising support from 1737 in the 1850 area, which is now key uptrend support. If we see a bounce today I would put my bull/bear level at 1878-82, as that would be the retest level for broken rising support from 1814, and also the likely range to break back over the 50 hour MA, which closed at 1882.70 yesterday and is currently declining. SPX 60min chart:

The Great Brain Robbery

No real damage has been done on the daily chart as yet. The daily middle bollinger band was broken, but that isn't bearish because SPX followed through to test the daily lower band. The low was two points higher than the lower band and I would score that as a technical hit. There was a pinocchio below the 50 DMA, but SPX recovered back above it before the close, and you can see from the chart below that  there were similar pinocchio/recovery candles at both the 1850 and 1859 lows, both of which were followed by strong rallies to higher highs. As long as SPX neither opens nor closes significantly under the 50 DMA it is still unbroken support. SPX daily chart:

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SPX held the SPX 1min rising channel for a while yesterday, but then it broke and we have been seeing a more substantial retracement. Could the Spring high now be in? Yes, but we're really going to need to see some more evidence before assuming that, and that's what I'll be looking at today. 
 
There's not much to say on the NDX chart other than to reiterate that a failure at this week's high would be an ideal right shoulder high on the very large H&S that has been forming there. I'll therefore start with RUT where RUT is now back within the falling channel that broke up on Monday. That situation isn't at panic stations yet and a low near yesterday's close in the 1100 area would be an ideal right shoulder low on a possible IHS, and a  low in the 1080-90 would make a possible second low on a possible larger double-bottom. Under there the bullish options get much thinner, but until then the bullish scenario is still in play. RUT 60min chart:
Who Knew?
On SPX I've been saying since the break up on Monday that the breakaway gap at 1878.48 SPX needs to remain intact until the breakaway move is complete. That is therefore very important support today and if that gap is filled that will look pretty bearish. If that is filled then I have rising support from 1814 in the 1873-5 area, and rising support from 1737 in the 1850 area. If 1850 is broken then then next target on the road to 1570 will be double-top support at 1814. SPX 60min chart:
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SPX made a new high yesterday at 1902.17 after breaking up from the range trading of the last few months. On the SPX daily chart there is nothing to suggest that the new high yesterday might be a significant reversal level, and I'm looking for more upside after the current small retracement completes. SPX tested the upper bollinger band at the high yesterday and we could start a bollinger band ride upwards with SPX trading around the upper band. There is some significant resistance however at the weekly upper band, currently at 1907. SPX daily chart:

New Highs on SPX

On the SPX 60min chart we haven't yet seen a hit of either of the rising wedge resistance trendlines that I'm watching here, so again there's nothing there or on RSI to suggest that yesterday's high was significant. SPX 60min chart:

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RUT broke up from the falling channel yesterday, and triggered the smaller double-bottom  with a target in the 1150 area. A sustained break over 1160 would trigger the larger double-bottom with a target in the 1225 area. We could see a deep AM low today to retest broken channel resistance. RUT 60min chart:

Apocalypse Postponed

With the break up on RUT my attention on NDX returns to the broken megaphone target at 3717 and the IHS targeting the 3760 area. First today though we need to see the strong break back over 3613 that we didn't see yesterday. NDX 60min chart:

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In the UK parliament it has been for a very long time been a rule that no MP (Member of Parliament) can call another MP a liar in the Houses of Parliament. Over the years a number of ways round this restriction have been used and my personal favorite is the term 'terminological inexactitude' as a euphemism for a lie.

Why does that spring to mind this morning? Well the Western Powers have been trying to be polite and conciliatory towards Russia over the Ukraine, despite Russia's breaking of their treaty commitments to Ukraine, and thinly masked manoeuvrings to try and seize a large part of the Ukraine for themselves, but that must be strained to breaking point this morning.

Two informal referendums were held by pro-Russia rebels in parts of Eastern Ukraine over the weekend and  unsurprisingly showed large majorities in favor of separation from Ukraine. Incredibly Russia then said that it 'respected the will of peoples' (to self-determination), which was only marginally less risible than if China had claimed the same. In Russia's case the bound and mutilated corpses in the many mass graves in the ruins of Chechnya might venture a contrary opinion if they were still in a position to. Perhaps Russia will clarify later that they are favor of self-determination only in the case of ethnic Russians living outside the current borders of Russia, which would deserve less incredulous laughter.

SPX effectively spent the whole of last week testing support at the daily middle band and the 50 DMA. There has been no push up from there, but it has not broken either. For the moment SPX remains in a narrow range waiting for direction. SPX daily chart:

Terminological Inexactitudes

What does last week's action tell us about that likely direction? Well the pattern setup on the SPX 60min chart is cautiously bearish, with a broken rising megaphone and possible double-top forming. Friday closed green, but the bears won slightly on points in my view as resistance was clearly at the 50 hour MA. As long as SPX holds under the 50 hour MA, the bears have the technical advantage, though it has now been crossed several times in the trendless action since the start of March. SPX 60min:

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I was going to entitle this post 'Winter is Coming' as it has a strongly bearish tone and I am something of a GoT fan. However it is early May, and despite the fact that my wife has been pressing me to have the central heating fixed, in theory at least, summer is coming.
In stock market terms though, the six months May through October are the months of winter on the markets. On my Stock Trader's Almanac 2014 statistics are given from 1950-2012 showing that $10,000 invested on SPX in November through April, the best six months of the year, would now be worth $575,846, while the same $10,000 invested on SPX in May through October, the worst six months of the year, would now be worth $15,356. That excludes dealing costs (and interest and taxes) but you get the point I'm sure:

Summer is Coming

The setup the bulls had into the highs yesterday was just beautiful. The rising channel on the chart I posted yesterday morning held perfectly at the AM high, and the IHS that I missed yesterday morning, but saw soon after the open targeted 1894 SPX for an effective test of the high. That test of the high looked like a done deal unless the rising channel broke, which looked unlikely as long as the IHS target area hadn't been reached. This was a really very strong setup for the bulls to retest the highs and try to break up, and they blew it really badly. SPX 1min chart:

Summer is Coming

We would often see a strong reaction in the other direction after a failure like this, and if we see that here, we now have a nice looking double top  setup here that would target the 1828 area on a break under Wednesday's low at 1859.
Looking at the 60min chart the larger pattern setup here is that the rising megaphone from the 1814 low broke down earlier this weak, and yesterday's move has now set up a double-top coming out of that break. This is a bearish setup, and as long as yesterday's high holds this invites a move down to the double-top target at 1828. There is some significant support on the way at the late April low at 1850, and rising channel support, currently in the 1840 area. SPX 60min chart:

Summer is Coming
On the daily chart I would note again the negative divergence on the daily RSI 5.  On a setup like this I'd generally be looking for a hit of the RSI 30 level and that hasn't been hit yet. That won't always happen, but the six previous examples marked on the RSI 5 below from the start of 2013 all made that target. Short term support is at the daily middle band and 50 DMA at 1865/6. The daily lower band at 1827 is a good fit with the double-top target in the 1828 area. SPX daily chart:
Summer is Coming
NYMO divergences against SPX have been a decent guide to significant highs and lows. There isn't always a divergence, but when there is it's well worth noting. There is a strong negative divergence here. SPX daily vs NYMO chart:
Summer is Coming

Is the path above now closed? No, though in my view the bulls have a lot to prove if we are to take it now. Their best hope is on the RUT chart which has some possible nested double-bottoms that could push RUT to new highs if the current falling channel can be broken. That is the key target for bulls here, and unless they can do that possible upside looks very limited. RUT 60min chart:

Summer is Coming

The last chart for today is the GLD 60min chart where the retest of broken triangle resistance is still ongoing and looking good so far. If that holds then we should see a very decent move up on GLD starting soon. GLD 60min chart:

Summer is Coming

The bottom line here is that we are prime topping season, bulls are repeatedly failing to make new highs, and we have large and technically very decent topping patterns forming across multiple main indices. If bears can break down through 1850 SPX then we may well start a very significant decline that would have an ideal target for me at the retest of the 2007 high on SPX in the 1575 area. Bulls could still turn this round, but until they prove that they aren't dead in the water I'll be favoring the overall bear setup here.

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