The bulls delivered a strong rally yesterday and there is actually a decent looking setup for a break up here that might well then deliver a fast retest of the all time highs on SPX. A daily RSI 5 buy signal fixed on NDX at the end of last week, which I wasn’t taking particularly seriously in the absence of a confirming signal on SPX, but at the close yesterday a daily RSI 5 buy signal also fixed on SPX. Both signals could deliver a sharp push up here through some key resistance levels.
On the SPX chart very strong resistance is in the 4500 area, with the SPX daily middle band currently at 4498.
SPX daily chart:
The SPX daily middle band is reinforced by key resistance at the the weekly middle band, which has been tested a few times but not meaningfully broken since the first decline in January this year. A break (weekly close) of that and conversion to support would open a possible all time high retest.
SPX weekly chart:
On the NDX daily chart a daily RSI 5 has fixed, as I have mentioned, and there is also a decent quality IHS forming that on a sustained break back above the neckline in the 15250 area would look for a minimum target at a retest of the all time high. The daily RSI 5 buy signal would make target long before an ATH retest, but NDX is still also on the larger daily RSI 14 buy signal that fixed after the current retracement low in March.
NDX daily chart:
Is there a pattern setup that might look for an all time high retest on SPX? Yes, the initial H&S that broke down on SPX failed on a rally that took SPX back over the right shoulder high. That fail has a target at a retest of the all time high.
There is also a Three Day Rule target back at a retest of the retracement low at 4114.65, but there is a small exception to that rule that has only happened twice (so far) in the last fifteen years, where a marginal higher low (like the one made shortly after the Three Day Rule signal fixed) is ok in the event that a triangle is forming. This retracement could be a bullish triangle from the all time high, and this could be wave D. If so the ideal right shoulder high would be in the 4590 area, then I’d expect a shortish wave E before the break up into an all time high retest.
One way or the other there are plenty of indications that the retracement this year is forming a bull flag, and that triangle is one form that such a bull flag can take.
SPX 60min chart:
Is there anything else here to support a retest of the all time high on SPX? Well it looks at first glance as though an equivalent IHS to the one on NDX may be forming here but that isn’t the case, as the pattern would be too large relative to the preceding trend. What SPX does have though is a possible rising megaphone from the March low that could be forming into that all time retest, and could allow that retest as soon as early May. The megaphone support trendline is only two touches, but the resistance trendline is an ideally formed and anchored three touch trendline. It is very nice and strengthens the case that there is an actively forming upward facing pattern.
There is one other thing worth noting on the SPX 15min chart, and that is the declining resistance trendline from the rally high at 4637.30. At the time of writing SPX is testing that for the third time today and that is a very obvious fail area. A break above opens a test of main resistance in the 4500 area.
SPX 15min chart:
In the absence of a break up here I’m expecting to see new retracement lows soon, and the news isn’t really supporting a return to the all time highs at the moment, but this is the highest quality bullish setup I’ve seen so far this year, so it is best to be watching it. As always, we’ll see.
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