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Friday, 27 February 2015

Channeling The Second Mouse

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:
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:
The NDX support trendline confirmed with a third touch at the low yesterday. I'll be watching that as a key indicator as to when this uptrend is failing seriously. Screen 3x 15min NDX RUT NYA:
CL has been very interesting this week. A falling wedge had formed and broken up with a bullish looking double bottom setup. I always look at the possibility that a falling wedge might at this stage evolve into a falling channel or megaphone but this one caught me by surprise by evolving into a larger falling wedge. These wedges break down about 30% of the time but the natural break would be up into a target in the 55 area and a possible extension on a conviction break over 55 into the 62 area.

With CL under 49 as I write there is a long entry here with a stop at 48.5 (very cautious), 48 (cautious) or 47.5 (less cautious) with a view to taking half at 55 (moving stop on remainder to 52) and a chance of getting 62 on the other half. Nice looking risk/reward trade. I am long CL here. CL 60min chart:
I mention regularly that before a significant high or low is made, ranges expand to allow trendlines to break and reversal patterns to form. This is not generally a case of the early bird getting the worm, as those who pile in at the first signs of weakness generally regret it. Instead this is more like the second mouse getting the cheese, where the first responder makes the supreme sacrifice to enable the second mouse to take the cheese from the mousetrap at leisure, and with much reduced risk.

If the high has already been made, which I doubt but maybe, then I'd be looking for a failure in the current 2112-4 area as the right shoulder high on a double top . My preferred option would be a test of the 2130 area. We shall see how this develops. Key supports here are the support trendline on NDX and the SPX 50 hour MA at 2106. The 50 hour MA has been tested three times in the last few days but has held each time so far.

Apologies for the late post today. I'm feeling a bit washed out. I shall try to catch up on sleep at the weekend. TGIF! :-)

Thursday, 26 February 2015

One More Heave

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:
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:
NYA also broke support and RUT has never established a new support trendline after the break down last week. These all look close to reversal. Screen 15min 3x NDX RUT NYA:
If I'm right about the pattern setup then we should see a touch and reversal at wedge resistance in the 2130 area before any significant retracement gets going. That would need to be in the next couple of days really as this setup is really looking increasingly cooked. I'm going to take a flyer and suggest that we could see early weakness followed by a drive up today. You read it here first :-)