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Monday, 22 December 2014

Xmas Week Begins

Today is the first day of what is in effect a two week holiday trading period into Friday 2nd January 2015. For most of this period volumes will be low and the lean will be bullish. The historical stats for today for instance are that it has closed up about 76% of the time. That said SPX needs some retracement or consolidation to establish a rising sustainable support from the last low. I was expecting that on Friday but we may see it today or tomorrow instead.

A decent rising channel has been established from the 1820 low now and the 60min buy signal at the low has made the target at the 70 level on the RSI 14. I am expecting a new all time high on SPX as the last part of the stats from the post 5 DMA runs, but that needn't be done today of course. SPX 60min chart:
Main overhead resistance is at the weekly upper band at 2101 and rising megaphone resistance in the 2110-20 area. This 2110-20 area is one that I am expecting to see tested over the holiday period or shortly afterwards. SPX weekly chart:
The stats are very bullish for today but there should be a decent retracement somewhere close here. Any dips of whatever size should be a strong buy.

Friday, 19 December 2014

Back in Crazytown

That was an amazing move yesterday and the double bottom target at 2060 on SPX was hit just before the close. That was rather faster than I had expected, and ES even made a new all time high overnight. ES made it back to over 70 handles over the 45 day pivot (1997.08) again overnight and so was back in Crazytown, where ES has spent much of the last few weeks. I'm expecting that ES may spend much of the rest of December there as well.

What are the odds of retracement today? Well I have a rising channel from the 1992 SPX low and as and when that breaks, most likely today, then I'll be looking for some retracement. SPX 1min chart:
The two huge white candles for the last two days are the largest pair this year of a double candle setup that is very rare historically, but that we have seen at most of the big lows this year. This setup comes at a break back over the 5 DMA, and starts with a large white candle like the one on Wednesday. The second candle is a breakaway candle with an unfilled opening gap and a tall white candle that closes on the high as we saw yesterday.

What happens the day after the breakaway candle? Well all three of the previous examples filled any opening gap and retraced at least 20% to 25% of the preceding day's candle. A sample of three is small, but I'd be expecting the opening gap on SPX to fill today at minimum, and if we see that minimum 20% retracement then that would target a retest of the 2045-48 area, close to a retest of the daily middle band at 2047. We could see that retracement today and that level would be obvious support.

After the retracement two of the three days then closed modestly up, and the third closed at a 50% retracement of the preceding day's candle. All three examples then closed up the following day. The SPX daily chart:
On the bigger picture I posted the SPX weekly chart on Thursday last week talking about strong support at the SPX middle band. Unless we see a collapse today the retracement would be a test of the middle band with an intraweek pinocchio down through it. The next obvious target is the upper band at 2100, and given that the 5 DMA stats tell us that after the past 5 DMA run retracement all five examples since the start of 1962 then made new highs, it's no stretch to see SPX testing 2100 soon. SPX weekly chart:
This may be the last day of decent volume before the Xmas lull. If ES still has the volatility the historical stats suggest that SPX fills the opening gap, then retests the SPX daily middle band in the 2048 area, and then (2 out of 3) closes up today and (3 out of 3) Monday. If we see a retest of the daily middle band today that should be a strong buy.