This Week’s Price Action
- Inverse H&S from last week, acquires target and then Brexit dump
- Potential bearish range breaks on the radar
- QQQ triggers bearish double top.
This week was all about Br-Exit. Last Sunday night while Dustin Johnson was bailing out the despicable USGA by winning the US Open handily and we quietly tuned in to watch a tremendous NBA final game 7, futures were ripping due to a poll of 800 people that had Bremain in the lead. Technically speaking, this gaped us out of an inverse H&S which acquired it’s target on Thursday afternoon after a choppy week of trading.
If you follow me daily, during the morning PEP Talks and Nightly Recaps, I basically said, I plan to do nothing most of the week. I followed that plan until Thursday when I traded the inverse H&S breakout on the QQQ. However, my rule was and always is I don’t hold into events or earnings, and Friday morning we found out why. The bag holder gamblers got stuck long, betting on an unknown event outcome.
If you were long, take it as a lesson in life and move on. We have no edge in predicting outcomes of major market catalytic events, so we don’t hold positions into them.
Let’s now begin the weekly review and figure out what the technicals are saying.
Swing Time Frame (1 hour) : In order to turn the tables bullish, we would need to clear this band of resistance. Otherwise looks like a lower swing high being set here in a swing down trend. We don’t have a clean pattern to work from but with markets in a trading range, appears a 2040 test is likely. Other indexes will back up this thesis.
If the range breaks, you can see how the pattern has played out in the past. Very possible we have our right shoulder now. This could take us to 1600. This current range is our number 1 priority for now.
Swing Time Frame (30 min) :
Testing the lower end of the 832 point range. A break below it would target 16499, which is also the 61.8 Fib retrace from the Feb low to the April High. Buckle Up.
Similar to the S&P, range break lower could test the lows.
Swing Time Frame (30 min) : Looking at the 161.8 Fib around 1100 to see if it can become support. Major support at 1088.
Inverted cup/handle or H-Setup target 1076.03
IF market unwinds, very possible we test the lower trend line.
Swing Time Frame (30 min) : Bearish Double top. Has not triggered yet, but target is 6.5% lower at 4377
H&S top formation is there. Triggering double top (shown above) would test the neckline.
Basically weakened last week by quite a bit. We went from 51% to 40% of stocks above 40DMA
The Bottom Line:
What is the Catalyst to take us higher? Is there a catalyst to now take us lower? Those are the questions you must ponder as a BTFDer. While markets are all still holding major support, a break of that support has major negative implications with target at least 4-5% lower and potentially far worse if the larger multi-year topping patterns do indeed play out. The catalyst is now in place and the technicals are aligned here for a potential perfect storm. With risk off assets like the Yen, and the shiny metals ripping higher, volatility catching a bid and bearish technicals setups in the major indexes, this is no the time to be blindly buying the dip. If the dust is going to settle and Brexit is no big deal, a bullish pattern will find it’s way into the tape, but it’s not there yet. Friday may have been day 1 of another big sell off.
This Week’s Chart’s in Focus:
Let’s review a few charts that I consider worthy of your attention:
Japanese Yen : This risk off asset saw follow through on it’s
Utilities (XLU): Continue to hold above the cup/handle breakout. As log as it stays above, this continues to be a very good chart to own. Risk is well defined.
XLY : Consumer Discrectionary
Doesn’t look all that healthy, so if you are looking for shorts, inside this sector is a good place to start. A lower high on the longer term time frame (pink), with a small H&S top in the right shoulder (yellow). This sector is on the verge of a late bull market breakdown.
Forming another potential double top. Another sector that looks vulnerable over the longer term.
GDX->A few of you asked me about these this week. This has a cup/handle pattern in motion with a target of 30.10, so continues to be fine.
All of the charts and commentary below are provided as information only and do not constitute a trade recommendation nor investment or trading advice. Any investments, trades, and/or speculations made in light of the ideas, opinions, and/or forecasts, expressed or implied herein, are committed at your own risk, financial or otherwise
If you enjoy the content at iBankCoin, please follow us on Twitter