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Friday, 21 November 2014

Here There Be Dragons

Yesterday morning ES tested the weekly pivot at 2035.5, and then SPX tested the 50 hour MA and then SPX was off to the races again. That 50 hour MA has held on five tests out of the last six trading days and until we see a break below it this uptrend is still very much intact. That first break below would normally also precede the main high, so that main high still doesn't look close here. SPX 60min chart:
I posted a chart on twitter last night showing pattern targets in the 2062-4 area and ES has exceeded that by quite a margin at the time of writing. If we see weakness on ES into the open the rising megaphone resistance trendline may yet hold as resistance. If (more likely) that ES gaps over it at the open then that's unlikely to be important today. SPX 5min chart:
Supporting the possible bull case is the bull flag I posted on RUT yesterday morning which broke up in the afternoon. The first target for that is a retest of the recent 1188 high. There is a possible further target if this is a mid-trend channel in the 1300 area but I'll not be considering that seriously unless RUT can at least make a new all time high. RUT 60min chart:
I'm not taking the short here but I posted the very nice looking rising wedge on AAPL yesterday and in a different market, and perhaps with a different company, this would be a very nice short setup. AAPL 60min chart:
I mentioned yesterday morning that SPX was one day from matching the longest run since 1980 of closes over the 5 day MA. That record run has now been matched and and as I've only looked at this back to 1980, this could even be a record run of these for the lifetime of SPX. On another close today over the 5 day MA, which seems likely, then that will be a new record for these since 1980, far eclipsing anything seen during a QE period. Where will this end? Hard to say but what I would say is that for the next four of these down in length the first closes below the 5 DMA were all bull flag continuations that then at least made a new high. SPX daily 5 DMA chart:
The SPX weekly upper band closed at 2064 yesterday and might close as high as 2067/8 today. It is Friday today and any close much above the weekly upper band would be a bearish punch through it, Those are rare though obviously we may see that here. If we do then we should expect a 4%+ retracement before Xmas. That level is strong resistance may well hold today though, in which case upside over the rest of the day is likely to be very limited.

Thursday, 20 November 2014

Signs of Weakness

Yesterday was the 24th consecutive close above the 5 day MA. This has only been exceeded by runs of 25 days in 1991 and 1987, though in 1987 one close on the MA might have been a whisker below. If we were to see another daily close above the 5 DMA then that would match the record back to 1980, and possibly for the SPX lifetime, as I've only looked back as far as 1980. This has been an amazing run. One thing I would note from the four longest runs since 1980 is that they all failed into modest bull flag retracements before continuing upwards. We may see this break down below the 5 DMA today and if we do, that's worth bearing in mind. SPX daily 5 DMA chart:
If we do see a retracement today, and the open looks likely to be very weak, then the obvious target would be the daily middle band. That closed yesterday at 2015.5 and is likely to go as high as 2020 today. SPX daily chart:
 For the first time in a while the range yesterday broke under the range on Tuesday, which was a significant sign of weakness. Main support was the same as it has been for a week at the 50 hour MA. If that should break with any confidence this morning then I'd be looking for follow through in a likely bull flag retracement. SPX 60min chart:
RUT has been leading to the downside here and broke a small double top yesterday with a target in the 1130 area. The overnight action here looks promising to see that target made though I have put a caveat for that on the chart in the event that we see a strong open and RUT outperforms today. RUT 60min chart:
I'm looking for an initial move up today followed by a move down that might develop into a trend down day. The key to seeing decent downside today is a clear break below the SPX 50 hour MA.