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Thursday, 17 April 2014

Doodled Megaphone

Yesterday morning SPX gapped over the 50 hour MA at 1843, double-bottom resistance at 1844, and the 50 DMA and falling channel resistance at 1847. Those held as support for the rest of the day and the opening gap didn't fill, so as long as they hold as support this morning the next step is to proceed towards the double-bottom target at 1873, in effect a test of the last rally high at 1872.53. SPX 60min chart:
At the low on Tuesday I drew in a half-doodled possible megaphone on my SPX 1min chart. I didn't mention it yesterday morning but it had my attention after the AM high yesterday was at megaphone resistance. We could see a test of 1872.53 within that megaphone today. SPX 1min chart:
The close today will be interesting on both the daily and weekly charts. On the daily chart the close yesterday was slightly over the middle bollinger band, currently at 1859. Promising but not yet a break over it with any conviction. I'll be watching to see whether SPX can do better today to open up the daily upper bollinger band as a target. SPX daily chart:
The close on the weekly chart will also be interesting to see whether we see a conviction break back over the middle band, currently at 1832. Regardless of that there is still an open 80% probability target, that I was looking at on Monday after the punch below the middle band, to hit the lower band before the next hit of the upper band. This might of course be one of the other 20%, as a similar candle was last year. SPX weekly chart:
For today I'm looking for a morning low and then a move up that could reach the double-bottom target at 1873. There is a chance of a significant decline in the afternoon which I'll be watching for. Tomorrow is Good Friday so my next post will be on Monday morning. Everyone have a great holiday weekend :-)

Wednesday, 16 April 2014

Tug of War

The only two kinds of TA that I refer to every day are classical charting, mainly my own, and Elliot Wave. For EW I don't of course use Prechter and EWI, as Prechter's analytical skills have long been eclipsed by his faith that we are in some kind of apocalyptic ending move which is the climax of a massive 5 point move up from 1500 AD, or 500 AD, or whatever. I'm not one to mock the religious beliefs of another, but faith has no place at all in analysis, so while Prechter stands on his lonely mountain top waiting for the end of the world as we know it, I've been ignoring him and watching the calls of my very capable EW chartist friends Pug and Alphahorn.

Much of the time my view is reasonably in sync with Pug and Alphahorn, which is reassuring as we approach the market using very different methods, but every so often there is a significant difference of opinion, and we have been having one of those since the low on Friday. My view, and the view of Cobra, the only classical chartist that I read every day, is that the low on Friday was a technically weak low, which means that after the likely rally (that all four of us called for), would most likely be followed by a lower low. Pug and Alphahorn on the other hand have been running primary counts which showed the low on Friday as a significant low.

I've said before that when there has been a significant disagreement of this kind in recent years then Pug and Alphahorn have been winning those two times out of three, and this may be one of those times, though I was really expecting more downside here, and this may still yet still turn out to just be a rally.

All of these three run subscription services by the way that in my view are very well worth the money. Of the three only Alphahorn runs a model portfolio, and that returned 61.78% last year, which I suspect disappointed him as he had been hoping to beat his 2011 return at 75%.

Returning to the setup today we have two remaining main options for the rally here, and my first and preferred option so far this week may well be steamrollered at the open. On that option I have resistance this morning at the SPX 50 hour MA at 1843, double-bottom resistance at 1844, the 50 DMA at 1847, and falling channel resistance at 1846-8. I posted the chart below on twitter yesterday night and the other resistance level I mentioned then was declining resistance from the high on ES which I mentioned would be a decent fit with SPX falling channel resistance this morning. That's still the case, but that broke overnight and is now at 1841.25 ES, some seven points below ES at the time of writing. If that remains the case then SPX will gap over all of these significant resistance levels at the open, and trigger a double top target in the 1873 SPX area. SPX 60min chart (from yesterday night):
If that happens then that brings us to my other main rally option, and that is a blend of the next two resistance levels above at the SPX daily middle bollinger band, which closed yesterday at 1859, and the last rally high, which peaked at 1872.53. There's a chance that we could see a failure at the daily middle band of course, but the obvious intraday target is a test of 1872.5 as the double-bottom target is at 1873. What I would look for then if we see a gap over 1848 SPX at the open that doesn't fill, is a run to test 1872.53, and then we see whether the daily middle band at 1859 SPX can hold as support. If bulls can recover back over the daily middle band and break the last rally high at 1872.53 then they should be back in the saddle and looking to test the 1897 high. SPX daily chart:
On other markets GLD broke the rally support trendline from the April 1st low yesterday morning and I'm watching to see whether the April 1st low at 123.11 can hold. If not then we are in a new move down. GLD 15min chart:
TLT is still making slow progress towards my upside target from my January projection. Negative divergence still a concern. I haven't updated my comments. TLT daily chart:
It seems likely that SPX will gap over resistance this morning, and that is some significant resistance, including the 50 hour MA which was the brick wall that reversed the last rally. This will significantly improve the odds of a bullish outcome here and opens up a retest of that rally high in the 1872/3 area. That retest is my second likely point of failure if this is a rally and we'll see also whether bulls can re-establish the daily middle band as support. I understand that Yellen will be publicly distributing dove guano at 12.30 and if she manages to do that without getting her foot stuck in her mouth again, then that may well give the bulls a boost.