- WE'RE JUST RANDOM SPECKS OF DUST IN A TORNADO TO THE MARKETS .......
- CHARTISTS MUST PUT ALL BIAS ASIDE AND LET THE CHARTS DO THE TALKING OR WE'LL SEE ONLY WHAT WE WANT TO SEE
- This blog has a copy of all header posts that I publish anywhere, so that those interested in seeing what my thoughts are on the markets can find them easily.
- I will be answering questions and responding to comments, so feel free to respond to any posts and I will see your comment even if it is not on the most recent post.
- If you're interested in seeing any intraday charts I post, I do that on twitter, and my twitter handle is @shjackcharts.
- The charts in the posts are as large as I can practically make them. if you would like to look at one more closely, click on it, and the link will take you to a larger version at screencast. If you click on that again, you will get a full page version, and can use the resizing function on your browser to enlarge parts of interest further.

Saturday, 13 March 2010

Should bears beware the Ides of March?

Things seem to be lining up nicely for a significant interim top to be made early next week. $BPNYA looks to be one bullish day or so away from hitting the top of the declining channel. This has been a very good indicator of significant recent tops and bottoms in recent months:


Similarly USD is only a short distance now from the bottom of the rising channel, and if it hits it, we should expect to see a new wave up in USD that should have a strong dampening effect on equities exuberance. Here it is on the DXM0 60min chart:


We are now only a few points away from the next serious resistance on SPX in the 1160 area. Here's the three year daily SPX chart showing the year-old rising channel with the significant support and resistance levels marked:


So everything is lining up nicely for the significant interim top that I have been expecting.

There are many saying though that we are on the cusp of a major rise in equities that will see us continue this already fairly long in the tooth upswing. Could it be so? Obviously it could. We are only ever weighing probabilities with market analysis. Lower probability outcomes are only ever just lower probability. What could make this potential parabolic rise a reality?

Well, these same three charts above could tell a different story. All channels break sooner or later, and every time that we reach the upper or lower trendline of a channel there is a significant risk that it will break up or down respectively. Equally, rising channels tend to break downwards just as declining channels tend to break upwards. There is obviously a significant risk that both the $BPNYA and USD channels will break next week.

The three year SPX chart tells a story as well. If the strong resistance in the 1160 area is broken, the next really significant resistance level is in the 1200 area.

There is also a longstanding gently declining channel on the Vix. The lower trendline of that channel would be under 15 if we were to touch it in the near future, and a major push upwards in equities could make that happen. If so however, the very significant top at the end of that push upwards should be signalled by the Vix touching the bottom trendline of the channel, and we should at the least see a very significant retracement after that:


This parabolic rise to the next interim top could happen, but it isn't really any particular cause for alarm for traders. If this scenario were to play out we would know quickly as the 1160 resistance would be broken with confidence and most likely the USD and $BPNYA channels would be broken at the same time. Any rise would also still most likely be confined within the strong rising ES channel, which is sufficiently steep to be reasonably confident that when it breaks, it will break down rather than up:


There is another indicator I will be watching closely as well, which is the very longstanding rectangle pattern on the weekly chart of XLF, the Financial Sector SPDR. At the moment it has made a perfect touch of the top of the rectangle and is back on the way down to the bottom. That is very bearish for equities generally in the near future. This is a particularly good example of a rectangle by the way, with perfectly exact touches of the bottom and top trendlines, a breakout either way has a good chance of making the rectangle target, and any close above or below the rectangle will be a very strong bullish or bearish indication for equities generally depending on the direction of the break.

However, the rectangle is of course a generally bullish pattern with 69% of breakouts to the upside, and upward breakouts particularly are often signalled by a partial decline in the rectangle before a second touch of the top trendline, so if we see the top of the rectangle touched again next week that would be a strong warning of a potential upside breakout with a target of 18.5, and to reach that target would likely require a major wave upwards in equities.


All in all though, there is a very strong probability that we are about to put in at least a significant interim top on equities. Oil and gold both broke downwards from their respective short term rising wedges on Friday, with targets of 72.5 and 1060 respectively, and while of course it is still possible that they will break back upwards, it is unlikely. Resolving to those targets would fit with a strong retracement in equities and that is what I think we will be seeing for most of the rest of March.

12 comments:

  1. I don't even know how I ended up here, but I thought this post was great. I don't
    know who you are but definitely you are going to a famous blogger if
    you aren't already ;) Cheers!

    Look at my page; Mulberry UK

    ReplyDelete
  2. Thank you for any other magnificent article. The place else may just anybody get that type of information in such an ideal manner of writing?
    I have a presentation next week, and I'm on the search for such info.

    my page: Find Out More

    ReplyDelete
  3. I was able to find good advice from your blog posts.

    Check out my website ... Recommended Reading

    ReplyDelete
  4. Hey, I think your site might be having browser compatibility issues.
    When I look at your blog site in Opera, it looks fine but when opening in Internet Explorer, it
    has some overlapping. I just wanted to give you a quick heads up!
    Other then that, fantastic blog!

    my web-site :: Home Page

    ReplyDelete
  5. It's very straightforward to find out any topic on web as compared to textbooks, as I found this piece of writing at this site.

    Here is my web blog ... Tory Burch Outlet - http://www.ngosummit.com -

    ReplyDelete
  6. What's Taking place i'm new to this, I stumbled
    upon this I've found It positively helpful and it has aided me out loads. I hope to contribute & assist different customers like its aided me. Great job.

    My website; Cheap Oakley Sunglasses

    ReplyDelete
  7. Hi, I do think this is a great web site. I stumbledupon it ;) I will come back once again since i have
    bookmarked it. Money and freedom is the best way to change,
    may you be rich and continue to help other people.

    Visit my web blog - Air Jordan Pas Cher

    ReplyDelete
  8. You really make it seem so easy with your presentation but I find this matter to be really something which I think I would never understand.
    It seems too complicated and extremely broad for me. I'm looking forward for your next post, I'll try to get the hang of it!


    Feel free to visit my web-site: Sac A Main Louis Vuitton

    ReplyDelete
  9. Fabulous, what a web site it is! This blog gives helpful facts to us, keep
    it up.

    My blog Cheap Jerseys

    ReplyDelete
  10. I all the time used to read article in news papers but now as I am a user of internet
    so from now I am using net for posts, thanks to web.

    My web-site Sac Louis Vuitton Pas Cher

    ReplyDelete
  11. When some one searches for his necessary thing, so he/she wants
    to be available that in detail, so that thing is maintained
    over here.

    my blog ... Chaussure De Foot

    ReplyDelete
  12. I’m not that much of a online reader to be
    honest but your sites really nice, keep it up! I'll go ahead and bookmark your site to come back later on. All the best

    Also visit my blog ... Air Max Pas Cher

    ReplyDelete