Yesterday made a lot of progress towards my channel support target in the 1975 SPX area, but it would be rare to see a move straight there unless that support was going to break. The move up from the low yesterday looks like a B wave bounce and the obvious targets are the 38.2% fib retrace in the 2025 area and the 50% fib retrace in the 2035 area. I wouldn't expect much higher as I'm expecting to see the open breakaway gap into 2043.94 respected on this move. SPX 60min chart:

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I laid out two H&S scenarios and favored the second one, with the caveat that we should know which option would be taken at or soon after the open today. Obviously SPX has gone with option 1 and is likely to open close to that H&S target in the 2010 area. SPX 15min chart:

Santa Has Left the Building

On the daily chart the falling channel that I was talking about is looking good and I currently have channel support there in the 1970-80 area. I'm not currently seeing any reason to think that target won't be tested soon. As I mention on the chart though, on the bigger picture this setup would usually be a bull flag so the bearish action today and this week does not preclude a test of the all time highs in the next few weeks. Making a big top is a process that cannot be hurried. This is still not a good time to buy puts and go on vacation. SPX daily chart:

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At the start of the week I posted the very bearish looking sequence of RUT charts, suggesting strongly that downside was likely to dominate the next couple of weeks, and after all the bullish excitement on Monday afternoon and Tuesday, all that has changed on RUT is that there are now nested double tops in place to clarify how RUT is going to make it to those downside targets. With the support breaks yesterday and gap down this morning it seems that Santa is leaving the building or has already left, and that being the case I'm not expecting the highs this week to be challenged before at least the second half of January. Here is the RUT 15min chart from yesterday's close to show the setup here. RUT 15min chart:

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The bulls put in a very strong day yesterday and, so far at least, the post-Xmas Santa Rally is intact. Bulls have the advantage today unless the bears can really impress. That would need a break below 2065 SPX this morning for me really & that would be the 2055/6 area on ES.

 

Tis The Season

NQ Mar 60min chart:

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I hope everyone had a great holiday. I did and am returning to work today relaxed and well rested, though there is still a bit of post-holiday tidying to do in my house before guests arrive tomorrow.

Resistible Force vs Movable Object

What are the markets looking like today? Well the charts are all looking pretty bearish, with SPX, NDX and RUT all in likely topping patterns from the three day Santa rally that eventually arrived last week. This is at odds with seasonality here, as the three days after Xmas after supposed to lean as bullish as the three days before. We'll see what happens here but the short term charts all lean bearish, and below I'm showing the RUT charts that I did yesterday as going from the 15min chart through 60min, daily and weekly charts is painting a tremendously bearish picture here for RUT over coming weeks. Is RUT really topping out here for a 10% new leg down? I'm thinking 70% yes. We'll see what develops from here.

Rising wedge / bear flag topping out on the RUT 15min chart:

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All bulls had to do yesterday was hold on to most of their gains from the previous day, but they couldn't do it. By the end of the day all they had managed to hold onto the 5dma, so there is at least no 5dma Three Day Rule target back at a retest of 1993. Unless bulls can reverse yesterday's reversal candle today though, the fail yesterday confirms the downtrend, and there is still no sign of that Santa Rally. 
 
No Sign of Santa

SPX daily chart:

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Bulls inflicted a lot of technical damage yesterday, with conviction breaks over the 50dma, 200dma and daily middle band. All bulls have to do to consolidate yesterday's gains is to hold at or above the daily middle band today. That closed yesterday at 2070. Bears regain the advantage IMO with a close below both of the 200dma at 2062 and the 50dma at 2060. Today is the third day on the 5dma Three Day Rule, so a close below the 5dma today would trigger a very likely retest of the 1993 low. the 5dma closed at 2040 yesterday but will likely close a bit higher today.

So far SPX is following the falling megaphone option that I was looking at in my morning post on Tuesday 8th December, and have been following since. You can see that post here. We have seen the  triangle thrust down to megaphone support, the low at 1993 just under my 1995-2000 target zone, and then the full triangle thrust retracement back to 2067 and bulls have broken back over strong resistance in the 50dma to daily mid band zone. If bears can't deliver a strong reversal candle back through support today, then the next move is a test of megaphone resistance, which is in the 2095-7 area today. As this megaphone is a bull flag on the bigger picture, a break up from it should then deliver a retest of the all time high at 2134, and I'd be looking for likely failure there or a little higher. SPX daily chart:

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Today is the day when we find out whether the Fed will be raising interest rates by 0.25%. In a normal year this might lose a contest for front page space in that event that Angelina Jolie's dog was lost on the same day, but with the last rate rise a long long long time ago, even this tiny move has assumed a great significance.

Back in the days when The Fed didn't spend all their time frantically trying to repair the appalling damage caused by previous Fed Chairmen, William McChesney Martin, Fed Chairman from 1951-70 said (paraphrasing) that it was the role of a central bank to 'take away the punchbowl just as the party was really getting going'. After Volcker in the 1980s though, a persistent deflation took hold in the quality of Fed Chairmen that is perhaps expressed best on the chart below:

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SPX went slightly below my 1997/8 target and established a slightly lower falling megaphone support trendline at 1993. On my main scenario that has been playing out very nicely so far, the next target within the megaphone in megaphone resistance in the 2096-9 area. We'll see. The important resistance levels today are marked on the chart below. SPX daily chart:

Resistance Options

RUT broke down slightly from the falling channel into a falling megaphone. The next obvious target within the megaphone is megaphone resistance in the 1135-7 area. RUT 15min chart:

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SPX made it most of the way to my target area but I'm not certain it's going to make it the rest of the way. 60min buy signals are already brewing on ES, NQ and TF. I'm ideally looking for a lower RTH low on SPX, NDX and RUT, but it's possible that the lower lows already made in globex will be enough. SPX 60min chart:

Globex Rollercoaster

NDX has already tested the obvious support trendline. Significantly lower in RTH would break that. NDX 60min chart:

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