This Week’s Price Action
- All Major US Indexes trigger swing time frame bullish patterns targeting higher.
- Markets Hovering just below all time highs, still in the range but have price action to take us out.
- Remain on Bull Trap alert at least until all time highs can become support.
Much like the bears back in February, the bulls are on the goal line, but still need the final push to break us out of the 300 point SPX trading range.
This week we saw some early weakness bought and the markets used the reaction to the Jobs report to trigger bullish patterns across the board. Technically speaking, if last weeks lows can hold we have target 5-6% higher from here, which is all time highs and then some. There is no bearish price action on the horizon and rather the only leg left for the bears to stand on is the All time high resistance in the SPX and DJIA. The SPX came 3 points from the All Time High on Friday. That level must continue to be respected as it means we are still in the 300 point trading range that we have been in since the end of QE3. This market has enjoyed both bull and bear trapping these patterns, so the range highs remain important. I for one will not be long if the neckline is not defended next week on any retest. In the SPX that neckline in 2110. Below that we go in neutral territory again. However above it, super bullish. It is very likely that level (2108ish) is tested at some point so it will be important for the bulls to defend it and take us higher, above the 2134 All time high. With this in mind, let’s review the indexes.
Swing Time Frame (30 min) : Bullish inverse H&S triggered with a cup/handle in the right shoulder. You can see how close we came to All Time High on Friday. Target 2225.74 as long as last week’s lows hold.
Completing this smaller pattern would break the range to the upside giving us much larger targets. For now, let’s focus on the first pattern targeting 2225. Important that the bulls can complete it.
Swing Time Frame (30 min) :
Same as SPX. Triggered pattern. Just below All Time Highs, target 5% move.
Still in the larger range. So respect that a bull trap still very possible. Use the swing time frame (30 min above) neckline to protect capital.
Swing Time Frame (30 min) : Inverse H&S Triggered. 1236 target
Much larger Inverse H&S to watch if swing time frame pattern can complete.
Swing Time Frame (30 min) : Inverse H&S targeting a test off All Time Highs.
You can see where the target would take us.
Strong Breadth this week. Never went oversold in the pullback and consolidation since March. That is a bullish sign.
The Bottom Line:
There is no good reason to not just focus on the current patterns in place and now in motion. As long as those necklines hold, the market wants higher. The risk is well defined to be long here. As I have said above, it is critical that we can close outside of all time highs on the SPX and DJIA because until we do, we must be on high alert for a bull trap. Traps (i.e pattern failures after breakout or breakdown) have been this market’s favorite trade of late and we must continue to keep our eyes peeled. That being said, we are seeing triggered patterns across all indexes which tells us the stars are aligned. Over the past few months, we were seeing setups in 1 or 2 of the indexes and the other 2 would be so so. Here we have clear buying taking place in all indexes leaving the bulls in the drivers seat. They have the benefit of the doubt above the neckline and last weeks lows. We will use those areas and the price action that develops on a move back below the neckline to re-evaluate, but until then, no reason at all to be trying to short.
This Week’s Chart’s in Focus:
Let’s review a few charts that I consider worthy of your attention:
Latin America (ILF): Bullish inverse H&S setup. Need a close above 27.40 to trigger, but keep on watch list.
Healthcare (XLV): Triggered bullish Inverse H&S. Should retest highs then re-evaluate. Full measured move is $82.
IAI: Aerospace and Defense.
Big Cup/Handle pattern near the highs. If it takes out recent highs that would trigger pattern. Target near 150.
Cup/Handle in motion as people chase for yield. Looks much like the chart of the Utilities I have been highlighting since early June. This one still has meat on it 38.95 target.
MOO (Agricultural Business) -> Inverse H&S under construction here. Something to watch.
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
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