A Tale Of Two Indices

A decent quality rising wedge has formed from the early March low, and that broke down last week. That could be a bullish underthrow of course or the wedge could be expanding. If wedge resistance is hit again today then at minimum I will assume the wedge has expanded, and redraw the wedge support trendline accordingly.

SPX 15min chart:

SPX broke back below the daily middle band at the low last week, and then rejected the next day, retesting the upper band on Friday. The 3sd upper band closed Friday in the 4250 area, and I’d be seeing the 4250-60 area as a likely upper limit for any upside today.

SPX daily BBs chart:

NDX has been leading strongly to the upside and I mentioned a couple of weeks ago that the very nice rising wedge from the March low there might break up. In that event what I watch for is a backtest that doesn’t break back below the rising wedge resistance trendline, and as long as that holds, as it did on the backtest last week, the rising wedge target here would be in the 17000 area. That may be what we are looking at here and we should have a better idea about that by the end of the week.

NDX 15min chart:

At the start of May there were two big indices testing strong resistance at the monthly middle band. That is at 4170 on SPX at the moment and we may see a modest break over that resistance at the monthly close tomorrow. That would be a significant technical break, though it would need a confirming close above next month.

SPX monthly chart:

NDX is a very different story. Tech has been leading to the upside and has really been the only strongly bullish segment of the market, albeit one that is strong enough to be dragging SPX up with it. On NDX there has been a very strong break up over the monthly middle band this month, opening a possible retest of the all time high. The large H&S that has broken down also failed on this move, and that failure has a target at a retest of the all time high, as with the wedge target on the NDX 15min chart. I am taking the possibility of an all time high retest on NDX very seriously.

NDX monthly chart:

Three weeks ago I was saying that the historical stats favored the bears into late May. That period has ended. The stats for this week are strongly bullish today, neutral tomorrow, and strongly bullish on Thursday and Friday. This is one of the most bullish leaning weeks of the year so we’ll see what the bulls can deliver. After this week the stats lean generally neutral to bearish for June.

In the very short term there is significant negative divergence on the EQ & NQ hourly charts, and it may be that the overnight highs are close to the highs we will see today. We’ll 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.

30th May 2023

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