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Wednesday, 16 June 2010

1102 ES Resistance Broken

The bulls finally rediscovered their mojo and broke the very strong resistance at 1102 ES yesterday. SPX also closed above the 200 daily SMA, and in my view that makes it unlikely that we will be revisiting the lows in the near future. For my money, the interim low is now confirmed as in, and the question is how far this rally will go.

In the short term ES bounced off rising trendline resistance at the high yesterday, and as I write is retesting the 1102 level. That may well now prove good support, but if it breaks I see a possible fall to the next strong support level in the 1084 area, which is also close to probable rising channel support. If we get there I'll be seeing that as a buying opportunity:


I've been looking hard at the SPX 15 min chart and on that I'm looking at the recent trading range as a rectangle with a target at 1164 ES and a possible IHS with a target in the same area. I have a strong uptrend resistance line, as with ES, but support looks mushy and undefined. I'm hoping that trading over the rest of the week will confirm a tradeable rising support trendline:


On the SPX daily chart with my model bear scenario, I've marked in the broken 200 SMA line and also the break yesterday of the 50 level on RSI, both very bullish signals. If we were to rise over the next two weeks to my model target, that would be in the 1164 SPX area as well, and that is the primary scenario that I'm considering now:


Vix broke down to under 26 yesterday and I've marked in a declining resistance trendline on the 60min chart that I am expecting should hold for the duration of this rally:


NYMO is probably the most interesting chart that I was looking at last night. Here's the daily chart showing that we have moved from extremely oversold to extremely overbought over the last three weeks. If you look at the chart, a move as fast as this from under -100 to over +80 has happened only twice in the last three years, once in the October 2008 rally, and again at the March 2009 low. The November 2008 to Jan 2009 move is also worth a look though:


This confirms in my mind that we have made a very significant low, though it is obviously very ambiguous over whether the move up that we are watching now is a rally or a move to new highs. I favor the former, but I'm bearing the latter possibility in mind too.

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