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We've been testing resistance on equities for three days now, and they may go higher, but unless we see some definite resistance breaks, this looks increasingly like topping action to me. The key trendline to watch in my view is the rising support trendline on ES from the last low, hit overnight and currently in the 1394 area. I have rising resistance trendlines in the 1404 and 1410 areas today if we see more upside:
If we were not in a very strong uptrend, I would have loaded the boat up short on SPX yesterday, as the bearish reversal setup there is really very nice indeed. The candlestick setup I was looking at yesterday suggested we might see a slightly higher high, which we've seen. Over the last two days rising wedge resistance on SPX has been hit at the high on both days. A Vix Sell (equities) Signal triggered on Wednesday and confirmed yesterday. Decent negative divergence on the 60min and very much on the daily while overbought on both. It really is a nice setup.
We are in a strong uptrend though and in strong uptrends bear reversal setups can fail repeatedly. That gives some reason for caution here. Another reason for caution is that short term swing tops on SPX have been taking quite a while lately, and the last one just trickled up my resistance trendline for a couple of weeks before the modest subsequent reversal.
Yesterday, interest rates went zooming higher and, naturally, TLT took a plunge. I think playing bonds on the bear side makes sense, but only after a retracement. I'd like to see TBT ease back below $20 and TLT to get as close to 113.89 as possible. Once that's in place, I think this makes for a terrific, relatively low-risk position.
I posted a chart last night on twitter that I'll start with today. It's a look at the very rare candlestick setup we've seen on SPX in the last two days, with the strong punch through the upper bollinger band on Tuesday, and then SPX opening and closing above the upper bollinger band yesterday. I have four instances of this happening since the 2009 low. Two marked a short term high and two were just a short way below. This is a respectably bearish setup and I've put the stats for what happened afterwards on the chart:
