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Friday, 31 July 2015

Will The Remaining Living Bear Please Stand Up?

Yesterday saw a sharp decline into an early morning low that was given back in a grind up for the rest of the day. The low was an almost perfect test of the daily middle band, and that may well be it for the retracement I was expecting. If not though then of course I was saying yesterday morning that more might be needed to be done on forming short term topping patterns, and I'd note that five of my six optic run charts now have nice looking possible double-top patterns, and the sixth is right at resistance and was turning down there at the close last night. SPX has now formed a very nice looking falling channel from the last two highs and if that survives into the open, then overall this is a potentially bearish setup for today. SPX 60min chart:
I've been looking for secondary patterns on my optic run charts established at the low yesterday and have a decentish rising channel on SPX that closed on the support trendline. There is now a larger decent quality rising wedge on INDU that also closed on the support trendline. No secondary pattern on TRAN yet but no real need for one either. All three charts have decent looking double top setups and anything below yesterday's close on SPX and INDU will be a support break. 3x 15min SPX INDU TRAN charts:
NDX is the only one of these six not showing an obvious double-top setup, but the secondary pattern there is a rising channel, and NDX closed the day close to channel resistance. Unless NDX gaps over channel resistance at the open, which looks possible, then NDX is leaning short here. RUT has formed a secondary rising wedge  and closed the day well above wedge support. NYA has formed a secondary rising channel (doubtful quality) and closed the day at rising support. Scan 3x 15min DX RUT NYA charts:
As the weekly candle fixes at the close today bulls want to break over the weekly middle band at the close to break back over it on the weekly closing basis.  That is currently at 2099.22 and bulls want a close at 2102.00 or higher for a clear break back above. SPX weekly chart:
The stats are bearish today and the pattern setup is unambiguously bearish. To change that bulls would like a gap up that doesn't fill, and if they manage that then I'd expect a strong day with a possible target in the 2126 area to entirely bullishly reverse last week's weekly candle, that entirely bearishly reversed the previous week's bullish breakout weekly candle. If we see SPX  over 2115 this morning that would be the obvious target area today in my view, though it would really be a strange thing to see. If that does happen however, it would be a solid confirmation of the new support trendlines on SPX, INDU and NYA, which would be useful later.

Thursday, 30 July 2015

Six Retracements for Six Broken Wedges

Another very strong day from the bulls yesterday, and both of the breaks above the daily mid band and the 5 DMA were strongly confirmed on SPX. That doesn't kill off any bear case altogether here, but it means that rather than trying to prevent a break up, bears would now have to break back down. My lean is bullish and I'm not really expecting bears to break back down, but I am expecting to see some retracement today, and I've put the key levels on the chart below to show what bears would need to do. SPX 5min chart:
Looking at my optic run US index charts, there are an impressive six out of six rising wedges from the lows, all of which have broken wedge support. There may be more to do on these in terms of forming short term topping patterns, but I would expect retracements very shortly, with minimum targets at the 38.2% fib retracements. We'll see how that goes today. Scan 3x 15min SPX INDU TRAN charts:
If I was to see anything to encourage the bears on these charts I would note that apart from TRAN, which tends to plough a lonely furrow in any case, the largest moves were on SPX and NYA, both retracing slightly over 61.8% of the move down into Monday. Dow only managed 50% and NDX and RUT only 38.2%. No bullish breaks on Dow, NDX and RUT as yet, though SPX and NYA are the deepest and broadest indices in terms of sector spread. Scan 3x 15min NDX RUT NYA charts:
Bears get a shot at trying to reverse this back down today, though that looks hard and I'm doubtful about them managing that. We should see a decent retracement regardless today though and if bears can't break this back down, this should be a decent dip to buy.