After The Holiday

I hope everyone had a great Independence Day weekend. For some obscure historical reason that isn’t a public holiday over here in the UK, but as I work US hours I had a very pleasant long weekend.

I’m going to look at the short and longer term prospects for SPX here, and I’ll start with an important longer term chart, the SPX monthly chart where there has now been a monthly close below the key support & resistance trendline on SPX since the 2009 low.

That opens the possibility for further downside and we may well be seeing that either sooner or later.

SPX monthly chart:

In the shorter term though, there are high quality bull flag setups on the US indices I follow, on SPX, NDX & Dow Industrials. On foreign indices there are others on Nikkei and DAX, and the DAX flag appears to have already broken up. This doesn’t mean that we are going to see across the board all time highs retested on these (excluding Nikkei where that is still the 1990 high), but it remains a significant possibility from this pattern setup.

If we are going to see that then a retest of the current 2022 low would improve the short term bottoming setup and I’m thinking we may see that retest today or tomorrow, with the historical stats leaning significantly bearish today.

Main short term resistance on SPX is at the daily middle band, now at 3871, and that would need to be broken and converted to open the upside and a possible test of main downtrend resistance at the weekly middle band currently at 4186. A break and conversion of that would open the path to a possible retest of the all time high.

SPX daily chart:

The other short term resistance that I am watching here on SPX is the 5dma, currently at 3830, and that was resistance on Friday. A daily close back above that would put SPX back on the Three Day Rule, and if we were to see that today, then a break back below it on either of the next two closes would set up a possible retracement low retest.

SPX daily 5dma chart:

On NDX, as with SPX, the bull flag setup is a high quality falling megaphone, and NDX is now between the 50% and 61.8% retracement levels for the move up from the 2020 low. A move much below the 61.8% fib retracement level in the 10590 area would weaken the bull flag setup.

NDX daily chart:

There is another high quality bull flag falling megaphone on Dow, and all three have solid positive divergence on the weekly charts, with a weekly RSI 5 buy signal already fixed on NDX.

INDU daily chart:

There is an opportunity to retest the 2022 low today or tomorrow as while the bullish stats on Friday delivered, there was no significant break to the upside. The stats for today lean significantly bearish, and after that the stats lean bullish until July opex on Friday July 15th, which again leans significantly bearish. The significantly bullish leaning days in the meantime are tomorrow, and Wednesday and Thursday next week.

If we do see a retest I would love to see the second low of a modest size double bottom be established there but I would add that if we are going to see a hard break down to start trashing the lovely bullish setup that has formed from the highs, then that would be an ideal time to start that too. We shall see.

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Written by:

Richard Chappell

Jack is a 20 year retail trading veteran and co-founder of The Art Of Chart. He started his blog at channelsandpatterns.net in 2010 and since has published tens of thousands of charts looking at hundreds of trading instruments across most tradeable markets, doing original work mainly in the areas of trendlines, patterns and divergences. At The Art Of Chart Jack has taught trading skills, technical analysis, and the discipline and trader psychology that allow those to be used effectively in trading.

05th Jul 2022

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