Quite a few of you will have read those posts as SPX was testing the 2040s, and those of you that didn't think that I was having bullish delusions most likely thought that was a credible bearish scenario. Fast forward to today and almost everyone is seeing this as a bullish breakout that will likely result in new highs. That was always a possibility of course, but has anything actually changed in the interim apart from the big rally that I predicted having now happened? I drew the arrows on the daily chart below on Wednesday last week and as you can see, SPX is pretty much where I was expecting then. SPX daily chart:
The three most likely scenarios here are, in my view at least are:
- Rejection at the double bottom target area 2118-27. Bearish H&S scenario.
- Rejection at a retest of the all time high 2134.72, with the daily and weekly upper bands strong resistance at 2136/7. Bearish double top scenario.
- Break up towards the monthly upper band 2178 area. Bullish breakout into September, still part of overall topping scenario.
I'm favoring the first then second options, but the odds of the third option will rise a lot if bears can't get rejection from these levels today or tomorrow. I'm not concerned about the increasingly universal assumption that this will break out, that's just recency bias. People were expecting a bearish breakout last week for the same reason. The odds of a bullish breakout here have increased slightly since I laid out this rally scenario nine days ago, but not by a lot. As always, time will tell.
I posted a chart yesterday on theartofchart.net forecasting a major inflection point test on USD in the 97.7 to 97.8 area. USD is testing that level now and while Stan and I are looking for rejection and a move to the 90/1 area, it may go the other way towards new highs. Watching with interest. USD daily chart (from yesterday):
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