- This blog has a copy of all header posts that I publish anywhere, so that those interested in seeing what my thoughts are on the markets can find them easily.
- I will be answering questions and responding to comments, so feel free to respond to any posts and I will see your comment even if it is not on the most recent post.
- If you're interested in seeing any intraday charts I post, I do that on twitter, and my twitter handle is @shjackcharts.
- The charts in the posts are as large as I can practically make them. if you would like to look at one more closely, click on it, and the link will take you to a larger version at screencast. If you click on that again, you will get a full page version, and can use the resizing function on your browser to enlarge parts of interest further.

Friday, 19 September 2014

Pavlov and the Three Little Bears

SPX made a new high yesterday and closed at 2011.36, only 0.13 over the daily upper band which closed the day at 2011.23. The bears had plenty of time to knock the market down after a new all time high was made in the morning, and failed to do so. The odds that we are starting an upper band ride on SPX improved sharply yesterday.

It's a struggle to remain objective at a time like this because the last couple of years have conditioned us all to dismiss any bear case at the first sign of trouble, and I'm struggling not to just do that here. The odds of a bullish resolution here are definitely improving, but that's not a done deal yet, and the stats from my SPX daily RSI5 / NYMO sell signal particularly are warning that we could still see a bearish resolution here, though if we are to see that we would need to see some significant weakness today or at latest on Monday.

For today on the daily chart I'm looking for a third day of riding the upper band. At the time of writing an open above the daily upper band looks likely. I would expect at minimum a touch of the daily upper band at some point during the day. The daily upper band closed yesterday at 2011 and probably won't close the day over 2015. SPX daily chart:
So how should we view the bear case here? Well there is an easy solution, as I have three support levels to watch on SPX here. If SPX fails to break any of them the bear case is dead in the water, and on a break of the third and last SPX will have broken down.

The first of those three support levels is at rising support from the 1978 low, and that is currently at 2004 and rising at about eight points per day. Until this is broken the bears aren't even on the radar really.

The second of those levels is the 50 hour MA, now at 1994. This should remain unbroken until the current uptrend is topping out, so a significant break below would cast very serious doubt about much further upside in the near future.

The third of those support levels is the last low at 1978.48. That is double top support here and a break below would currently target the mid-1940s. If we see that low broken then it should follow through to at least that double top target and possibly a lot lower. SPX 60min chart:
USD is approaching the first of my main resistance levels,and that is at declining resistance from the 1985 high in the 86/7 area. It's hard to give an exact number from this 34 year monthly chart but I'll be posting this chart often as that area is reached. A break above may signal the end of the huge secular bear market in USD since 1985, and would open up a test of major double bottom resistance at 88.71. USD monthly main chart:
I've been giving the precious metals market some thought. The nice looking bull setups at the start of 2014 never followed through, and if we are looking at a major bull run on USD that may extend forward for years, then precious metals are unlikely to prosper. I have a decent falling wedge on the silver weekly chart and if silver can break and hold below the very strong support at 18/9, then the next obvious target would be wedge support in the 12 area. Silver weekly chart:
So my solution to the conundrum of what to think of the bear case here is to disregard it unless bears can demonstrate that they are still in the game by breaking the three support levels listed above. Until we see that my working assumption will be that SPX is riding the daily upper band, and if SPX is doing that, then I'd be looking for early dips to buy and grinding upwards the remainder of the time.

Thursday, 18 September 2014

Feeling the Pinch

SPX touched the daily upper band at the high yesterday and also tested the 50 hour MA at the low, so the two key targets that I gave yesterday morning were both made. So what now? Well I'm still looking for a (hopefully) marginal) new all time high, so I'm looking for at least one more test of the upper band, but once there SPX is at a fork in the road and I'm going to talk about the bull and bear scenarios there.

The daily bands are pinching sharply here and that means that there is a very high probability that SPX is shortly going to start either an upper or lower band ride lasting at least three days and possibly much more. I've marked the last four daily band pinches on the chart below. The direction is unknown though the odds I gave yesterday of a downward resolution here at 2 to 1 is where I see the odds of the band ride here as well. What this means in practical terms, given that SPX tested the daily upper band yesterday, is that if we now see a strong new high, then this is most likely resolving upwards.

Resistance on the bull scenario is currently at rising wedge resistance on the daily chart in the 2035 area, larger rising wedge resistance on the weekly chart in the 2030-40 area, and the weekly upper band, currently at 2031.

Downside targets on the bear scenario start at the 1940 area on a break below the 1978 low, then a possible test of the 1904 low, and then on a sustained break below 1904 main double top support, I would have a double top target in the 1795 area. SPX daily chart:
SPX weekly chart:
What would be a serious sign of weakness here? Strong rejection at a new high obviously, but also a significant break below the 50 hour MA, as in a strong uptrend that should be very strong support. If support there isn't holding, then the chances are that we are not in a strong uptrend, and the daily band pinch is telling us here that SPX will be in either a strong uptrend or downtrend within days, so we might well then be starting a strong downtrend. SPX 60min chart:
Oil reached my target and main double top support last week and so far is bouncing strongly there. I'm in two minds about what happens next, but if we see a test of 96 then declining resistance from the high will be broken, and if we see a sustained break over 96 then I would have a double bottom target in the 101.50 area. WTIC daily chart:
It seems likely that we will see the all time highs tested again today and if we see a new high I'll be watching for rejection there. If we see a daily close at or over the SPX daily upper band (currently at 2009) then the chances of an upside resolution here would increase considerably.