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Tuesday, 6 July 2010

ES Interim Low Probably In - Good Bounce Plays

I was expecting that we would make a low on ES early this week, and I think we made it overnight at 1003 as a significant declining resistance trendline was broken after that low:


I'm not absolutely certain that the interim low is in, and looking at EURUSD particularly I had expected to see a bit more downside first, but looking at quite a few charts this morning I think that most likely that won't now happen.

I've marked in my expectations for a bounce target on the ES daily chart and, though I haven't marked it in on this chart, the low point on SPX was almost exactly at the 38.2% fib retracement of the move up since March 2009, which was interesting. On the ES daily chart there was a touch of the RSI 30 oversold level, with some positive divergence on MACD, and the lower trendline of the (sloppy) declining channel was hit on Friday:


For promising bounce plays I'd highlight oil and copper, both on the September futures. Oil on the 60min chart has broken up through a significant declining resistance trendline and has a good chance of making it back up to $78 IMO to hit the upper trendline of what appears to be a broadening descending wedge:

The copper broken rising wedge that I posted the other day appears to have been a diagonal slice of a previously unrevealed rising channel. Both rising and falling wedges frequently develop into channels which is always something to bear in mind when trading them. Copper also appears to have formed a small IHS indicating to the $307 area, though my target is the top of the rising channel in the $315 area:


I'm expecting a bounce here rather than a longer term bottom, though if strong declining resistance on ES/SPX and EURUSD is broken that could still go the other way. At the moment however the SMA 50 & 200 death cross is being made on the  SPX daily chart, and also the EMA 13 & 34 cross on the weekly chart, both very bearish indicators for the rest of the summer.

It would be nice to get a hindenburg omen as well of course, but one of the preconditions for that is that the NYSE ten week simple moving average must be rising, and that looks unlikely in the near future without a major bull break up, which would then make it hard to get the number of new yearly lows required to trigger an omen. Wikipedia have an excellent page on this indicator for anyone interested in how it triggers.

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