On the daily chart the main thing that happened yesterday was that bulls tried to break back over the middle band and failed. Unless that changes quickly then the next obvious target is either the the 50 MA and EMA in the 2100 area, or the triple support/target in the 2082-4 area at the 100 MA, the lower band and rising wedge on the middle rising wedge (mummy bear) of the three bearish rising wedges that I was looking at yesterday morning. I'm strongly favoring that lower target. SPX daily chart:

The Second Mouse

I've marked out all three of the three bearish rising wedges on the 60min chart below, and rising support on baby bear was broken yesterday morning. There was a strong rally after that which was firmly rejected at the test of the 50 hour MA for the third time in the last four days. Unless that changes the next move should be down. SPX 60min chart:


I posted the chart below on Friday and support on this rising wedge held through to the end of the day. Whether it holds this morning may well decide the week. SPX 15min chart:

The Three Bears

This is just the smallest of three bearish rising wedges here. The largest from the October low has already broken down and the smaller two rising wedges are part of the topping pattern for that wedge. A break below smallest rising wedge support opens up a test of medium sized rising wedge support in  the 2080 area. a break below the 2080 area would invite a test of double top support at 2039.
While bulls are holding smaller rising wedge support though, they still have a shot at clearing the 50 hour MA at 2120 and heading of to test the wedge resistance levels in the 2135-45 area, so we'll see how they do this morning. SPX 60min chart:


Yesterday was a fairly classic inside day, with SPX holding the 2110 bull/bear line that I gave in the morning and making a model 50% fib retracement of the move up from Tuesday's low. So far, so bullish. As long as yesterday's low holds I'm therefore leaning bullish into a retest of the highs.

That said there is a significant issue that bulls need to sort out without much delay, and that is the failure so far to recapture and sustain trade over the key 50 hour MA, now at 2123. Both Wednesday and Thursday have failed there and if we see another fail this morning then we might well see a reversal down to the support trendline on the rising wedge from 2145 marked on the chart below. That would be in the 2080 area at the moment.

You can also see looking at the shorter term wedge that the obvious targets within it are the highs retest and the 2138 area. Anything would require a break over wedge resistance. SPX 60min chart:

Tick Tock

Looking at the 5min chart bulls don't really want to lose short term rising channel support at 2118, and need to take out falling channel resistance at 2124 as a matter of urgency. If bulls can do that then a retest of the highs should open up. If not the bulls could have a very bad day today. SPX 5min chart:


The bulls put in a very strong day yesterday and that has most likely put SPX on the 25% highs retest path, though the market has been so whippy lately that I'd like to see that SPX holds 2110-8 this morning to be sure. On the stats I gave last Friday one of these made a marginal new high that was the second high of a double top, and the other continued the previous uptrend. 

In truth these are almost a single option here, if only because resistance on the rising channel from the 2012 lows is now in the 2190-220 range, so unless that resistance could be broken, which historically is most unlikely, then headroom here is too limited to continue an uptrend for long.

If we are looking at the highs retest option then the obvious resistance levels are at the current all time high at 2134.72, the daily upper band at 2141 and the weekly upper band at 2153. The RUT chart is favoring the lower targets and the higher target would be a near perfect retest of broken support on the rising wedge from the October low so that has some appeal too.

If we see the continuation option that we would most likely punch through the weekly upper band (weekly close basis). if so I'll roll out the stats on these punches as indicators for an imminent top.
The 15min and 5min buy signals that I mentioned yesterday morning have both made target and a 5min sell signal fixed at the close yesterday, so I'm favoring an AM low today. SPX weekly chart:

Nowhere To Run To

SPX daily chart:


That was a decent decline yesterday, though ideally bears should have controlled the close and they didn't. The minimum requirement on all the various sell indicators that I was looking at on Friday and yesterday morning were met as the 15min and 60min sell signals made target, the RSI5/NYMO sell signal made a visual hit just shy of the 30 level at 31.54. That was a very near miss and I'd count that as close enough, so that is effectively made though usually we would see a close under the 30 level and we'll most likely see one here as well.

In terms of the stats I was looking at on Friday for series of bearish reversal candles the minimum requirement of a 1.65% decline was met yesterday with move of 1.665% from the all time high into yesterday's low. Of the nine examples that I listed, two reversed back up to retest the high after that decline, of which one continued the previous uptrend, and the other made a marginal new high before a 9.83% decline from that second high. Six continued down without a retest of the high to a median decline of 4.5% to 5% from the high, and an average (mean) decline of 15%. The odds therefore favor continuation down without a retest by three to one. We shall see how far the bulls can rally today.

As for the daily candle yesterday, that was a confident punch down through the daily middle band. The key for the bears today is to close at or below the middle band, and bulls want to reverse yesterday's candle with a strong close back above it. SPX daily chart:

A Decent Start

All the short term reversal pattern targets I had marked on my optic run charts yesterday morning made target and I have very decent looking support trendlines on SPX and Dow now. The rally today should establish the declining resistance trendline now. One note of interest on this particular chart is that TRAN did a bearish overthrow of the falling wedge there on Friday and then broke down hard from that falling wedge yesterday.

The target is in the 8080 area and I would generally expect that target to be made. That leans towards continuation down after a limited rally here.

Scan 3x 15min SPX INDU TRAN charts:

A Decent Start

On NDX and RUT I would also note that these were both in clear channels (albeit hard ones to identify early), and those both broke down yesterday. Again this suggests continuation after a limited rally.  Scan 3x NDX RUT NYA charts:

A Decent Start

USD has rallied faster than I expected and I have updated the path I am expecting here accordingly. I'm neutral about whether USD breaks up at the test of channel/flag resistance. USD daily chart:

A Decent Start

30yr bond yields are following the likely path that I laid out for these last week. We may see yields rally a bit today and if so I'd expect that to be a sell. TYX daily chart:

A Decent Start

The picture on TLT is mainly just an inversion of the TYX chart. The TYX double top broke down yesterday as the TLT double bottom was breaking up. TLT 60min chart:

A Decent Start

SPX is on 5min and 15min buy signals from the low yesterday and we should see a rally of whatever size today. Ideally I'd be looking for that to fail in the 2112.5 area ideal (38.2% fib retrace) and my bull/bear line today is at 2121, with the 61.8% fib retrace level there and the 50 hour MA declining into that area rapidly.

Source: Springheel Jack

A daily RSI5 / NYMO sell signal fixed at the close on Friday, and this is a very high performance sell signal. I think the hit rate for this signal is 75%+ and I haven't updated the statistics today as the last six RSI5/NYMO buy or sell signals on the chart below all made target (the 30 level on the daily RSI 5), so the stats certainly aren't getting worse. This daily sell signal joins the 60min and 15min sell signals still open from last week. SPX daily chart:

On The Road to 1820

As for the short term pattern setups here they are look as though they are topping or have already topped. That's with the exception of TRAN which was making new 2015 lows last week. Scan 3x 15min SPX INDU TRAN:


I've been doing more work on the series of bearish reversal candles over the last twenty years and have combed through 90% or so of the intervening period. I'll finish that at the weekend and may do a dedicated post on these. The ones I have found so far are:

1999 Feb - From 2nd candle into 5% decline
2002 Dec - From 2nd candle into 17.3% decline
2004 Dec - From 2nd candle into 4.46% decline, then marginal higher high, then 7.56% decline
2005 Oct - From 2nd candle into 2.08% decline
2005 Nov - Failed and resumed uptrend into December interim high
2005 Dec - From 2nd candle into 4.44% decline
2007 Oct - From 3rd candle into 57.4% decline
2014 May - From 2nd candle into 1.66% decline
2014 Sept - From 2nd candle into 1.65% decline, then marginal higher high, then 9.83% decline
2015 May - To be determined

Now the first thing that really springs to the eye here is that the only two of these series of two bearish reversal candles made a new high short term, and one of those was the September 2014 series of three. 8 of the 9 resolved down effectively immediately. If we should beat Wednesday's high at 2134.72 before a decline to at minimum a test of 2099.5 then this time would be a rarity, and that could happen, but the odds are against it, and if seen that would most likely be because of tiny holiday volume. . I would note that the SPX high yesterday was 0.44 handles under Wednesday's new all time high. This setup is highly bearish short term and the median decline from it has been in the 4/5% area.

All indices on my optic run list have now broken short term support including SPX, which tested rising wedge support at the open yesterday, and broke wedge support slightly at the open today. A possible double top is in place which would target the 2111 area on a break below 2123.  For obvious historical reasons I would be looking for continuation down to at least test the 2100 area. Scan 3x 15min SPX INDU TRAN charts:

Chop Top

Scan 3x 15min NDX RUT NYA charts:


I've been reading a lot of talk this morning about how there is no real chance that SPX will make any kind of high in the easily foreseeable future and that's natural. This wave up from October 2011 has been so long and so powerful that it has left many with the strong impression that TA is valueless and that the only possible road to success is buying the dip and holding on at all costs. An extended wave 3 up will breed bullish complacency.

In all honesty that may well be the case for another two or three years, depending on the individual trader's tolerance for pain, and over a timescale of decades the long side always wins through. However the current setup on equities looks VERY toppy, and the level of denial that I've been seeing from some quarters about this just beggars belief.

We have seen two consecutive bearish reversal candles in the last two days. A bearish reversal candle is one where a new high is made and then the day closes red. These candles are common enough, and if you look through the SPX chart you will see many of these both at tops and smaller reversals. Series of this type of candle are rare however. My friend found seven on SPY in the last 12 years that he posted last night, all of which resolved bearishly, and I've had a quick look this morning at past series of these on SPX.

I found three series on SPX since the start of 2004, though I'll be going through in more detail over the next few days to see if I missed any. The first instance was a series of two in late December 2004 at the first high of a (failed) double top. There was an immediate 4.46% decline, then a marginal higher high, then a 7.56% decline. SPX daily BRC Series 2004/5:

Denial is NOT a River in Africa

The second instance, again a series of two was at the 2007 top, and I'm going to assume that people remember what happened after that one well enough that I don't need to post the stats for it.

The third instance was a series of three at the first high of a double top in September 2014. There was an immediate 1.65% decline, then a marginal higher high, then a 9.83% decline into the October low last year. SPX daily BRC Series 2014:


The tape didn't actually move much yesterday, but nonetheless the bears had a very decent technical day. On SPX It looks very much as though the possible falling wedge I posted yesterday morning may be in play, and if so that is very significant, because in this context that would be an EW ending diagonal, a terminating pattern that in turn is the final move within the much larger rising wedge / ending diagonal from the October low. I'm very much liking the odds of putting in the spring high in this area.

Indices are looking increasingly bearish here. The appear to be rising wedges on SPX, INDU, RUT and NYA, and at the time of writing only SPX and RUT haven't broken rising support from the lows on 6th May. The short term high may not quite be in yet, but it looks close, and I now have SPX on both 15min and 60min RSI sell signals. What I would like to see next is for SPX to test rising wedge support to confirm or break it, and that's currently in the 2118 area with my trend health bellwether the 60min 50 MA slightly below at 2115. Scan 3x SPX INDU TRAN 15min charts:

Weak Highs

Scan 3x NDX RUT NYA 15min charts:


I gave my preferred topping range last week as 2126-35, with a possible overthrow into the weekly upper band at 2145. The weekly upper band is now at 2152. The high yesterday was at 2131.78, well into that preferred topping zone.

Short term the chart looks weak, with a 5min sell signal, a 15min sell signal not yet fixed, and a possible rising wedge resistance trendline hit at the high yesterday. That opens up a possible move to test rising support from 2067 and the 50 hour MA, currently in the 2012-4 area. A break below there should mean mean that the spring high has most likely been made, though it might still then be retested. SPX 15min chart:

Topping Options

If we see some strength today then I will be watching to see whether an upper band ride might be starting. If so I'd be expecting at least a test of the daily upper band at 2132 today. If an upper band ride gets established that could run SPX up through my preferred target area (up to broken rising wedge support) into higher options. SPX daily chart:


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