The ability of the media to weave together news and the markets has a strange inverted genius to it. If ES has risen strongly on the decent NFP number this morning then the explanation would have been that the market was responding to the increasing strength of the US economy. As ES has fallen instead the explanation will be that the increasing strength of the US economy is making further QE less likely and bringing forward the prospect of increasing interest rates. We should never underestimate the power of a good rationalization:

Personally I wonder whether the news was actually important here at all, as a retest of Wednesday's low was always a strong possibility. The bear scenario requires it to complete and test the H&S targeting the 2055 area on a break below Wednesday's lows. The bulls need it to set up a double bottom that would target a retest of the all time high on a break over yesterday's highs. SPX 5min chart:

Inflection Point Test

The really key support here today however is the SPX daily middle band. That needs to hold on a closing basis and is starting today in the 2094 area. A decent break of that and the H&S today would target the IHS target at 2055 and the daily lower band at 2052, and I'd expect those targets to then be made.

Inflection Point Test

I'm leaning towards the short term bull case into 2130 as long as the daily middle band holds.

Source: Springheel Jack

As I was suggesting in my morning post yesterday SPX tested the daily middle band and found support there. As long that support holds (daily close basis) then I'm still looking for a touch of rising wedge resistance on the chart below and that is currently in the 2130 area. SPX daily chart:

Keeping It Simple

The short term pattern setup here is pretty clear. The falling megaphone from the 2017 rally high was tested yesterday afternoon and SPX gapped over it this morning. On the bull scenario SPX pushes up hard here, and pushes through in the next couple of days to that 2130 target. On the bear scenario the high on this rally would be capped in the 2105 area and then at some point in the next 24 hours or so SPX would return to the H&S neckline and break it, on the way to the H&S target in the 2055 area. SPX 5min chart:


Coming into the week there is now a very nice H&S formed and testing the neckline late Friday afternoon. On a break down the target would be 2088. Will the bears deliver? Well they've blown a few nice setups lately, nothing as nice as this but we'll see. SPX 5min chart:

Show Us The Money

All of the six indices below have now broken support from the last serious low and there are obvious reversal patterns of most of them now. Screen 3x 15min SPX INDU TRAN:


SPX has still not reached my wedge resistance trendline target in the 2130 area and might not of course, but my working assumption is that this uptrend will be incomplete until that is tested. I could be mistaken however. SPX daily chart:

Channeling The Second Mouse

The US indices are looking increasingly cooked now, with all but NDX having broken trendline support from the last low now. Possible H&S patterns are forming on SPX, INDU and NYA. Reversals are coming soon but I'm thinking that the bulls need to push SPX just a little further. Screen 3x 15min SPX INDU TRAN:


SPX made a higher high yesterday but still hasn't yet made my upside target at wedge resistance. My working assumption is that will be hit today or tomorrow. Important support is at the 50 hour MA at 2103/4. We may see a spike down before the high is made to set up the reversal pattern. If so I'd be looking for decent support in the 2100 area. SPX 60min chart:

One More Heave

On the pattern setup all the indices are looking close to cooked now. SPX broke rising support again yesterday. Screen 15min 3x SPX INDU TRAN:


SPX is approaching wedge resistance and broken trendline support, and those should intersect in the 2130 area tomorrow or Friday. Ideally the next short term high will be made there in that timeframe. I'm not expecting any overthrow because I'm expecting this high to retested and exceeded within a few weeks. That is when we may see an overthrow as SPX tests main resistance somewhere (by then) in the 2150-2200 area. SPX daily chart:

Getting Close Now

I was saying on Friday that most of my optic run charts from the last low didn't look cooked yet. That's no longer the case and these all now look ready to break down soon. Screen 3x 15min SPX INDU TRAN chart:


I'm ready to do a projection of what I am thinking may well happen on SPX over the next twelve months. My main scenario is this, and variants of the same scenario. It's a good fit with the pattern structure, and the first month indicator for 2015 that indicated strongly that 2015 would at best be a flat year.

Does this match any other forecasts that I'm reading? Well no, most are far more bullish and they could be right, but I posted an even more minority view projection for bonds at the start of 2014 to general incredulity, and price then followed my arrows very closely for the next six months as everyone betting on the almost universally expected big bonds decline got a very nasty surprise. We'll see whether this projection fares as well as that one did. SPX daily projection 150224:

Minority Reports

No much else to add on SPX today after yesterday's inside day candle so I'll look at EEM today. I posted a chart last September saying that the obvious next target on EEM was triangle support in the 38 area. That overshot slightly and reversed back up. The next obvious target is triangle resistance in the 45 area. EEM weekly main chart:


SPX didn't make it to my minimum retracement target at 2080 as it made a perfect touch of the 50 hour MA and reversed hard there. That does tend to be solid support in uptrends until they are into the topping process and, as I was saying on Friday morning, this uptrend doesn't look finished yet.

I am considering the possibility that a rising wedge from the October low is still forming and have drawn in that possible rising wedge support trendline in blue dotted line on the chart below.  If that is the case then there is a very obvious target in the 2120-5 area at the intersection of the original wedge support trendline and the wedge resistance trendline. That is the first area of resistance that I am watching. SPX 60min chart:

Support at the 50 Hour MA

If the wedge overthrows that resistance area then my last area of resistance is at the weekly upper band and primary trendline resistance, now in the 2145-50 area. If tested I am expecting that area to hold as resistance. SPX weekly chart:


I've had a few questions about whether I think that the uptrend from 1980.90 is over and on balance the answer is no. The reason why is on the charts below showing the patterns from that low on SPX, Dow, TRAN, NDX, RUT and NYA. Only two of those show decent patterns from that low and they are SPX and RUT. I could be mistaken but I'd be expecting most or all to show decent patterns at a strong high.  If we see a break back down through the daily middle band at 2056 I'd look again.

Screen 3x SPX INDU TRAN 15min chart:

Weak High

Screen 3x NDX RUT NYA 15min chart:


The rising wedge I was talking about yesterday morning broke down and retested during the day. We are likely to see some retracement here and possibly a significant high. If we are looking at a retracement my minimum target area is the 23.6% fib retrace in the 2073 area, but my usual target range would be the 38.2% fib at 2055, the 50% fib at 2041 and the 61.8% fib at 2026. I would note that the daily middle band closed yesterday at 2053, so we might see a retest of the daily middle band. SPX 5min chart:

Rising Wedge Broken

If we were to see a full reversal here then I have a scenario where SPX has just made the second high of a double top that would target 1860.40 on a break below 1980.90. I'll be upgrading that scenario if we see a clear break back below the daily middle band. I have a 60min RSI 14 sell signal triggered yesterday which is strongly suggesting retracement here. SPX 60min chart:


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