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Friday, 17 September 2010

Bullish Breaks

Resistance broke at the ES IHS neckline overnight which was very bullish, though it remains to be seen whether we now run up quite a way further or fall back before the neckline is also broken during trading hours. There has been a lot of talk about SPX being overbought here. That's true on a short term basis but we're not yet overbought on the daily RSI of course:

There is still some chance that resistance might hold short term in the ESZ0 1132 - 1135 area today. I have a resistance trendline from 1075 on the 15min chart that has been tested four times previously and held. It has been tested hard in the last couple of hours but has held so far. If that ES resistance trendline breaks I'll be considering resistance levels in the 1145 to 1175 area:


On 30 year treasuries the rising channel has now definitely broken down, which adds to the bullish picture on equities:


EURUSD and GBPUSD made significant gains overnight but I won't repost the charts today as I've little to add to yesterday's comments. CADUSD broke resistance at 97.6 and the next obvious target is the rectangle top at 98.65:


The Yen is looking interesting for a change here. I don't normally chart JPYUSD as it doesn't tend to hold trendlines well but a major resistance area is being tested and we could be seeing an IHS form:


Looking at the USD currency pairs I'm definitely thinking that the next obvious support for USD is at 80 as I posted yesterday, and if we are seeing a move there at the moment then ES / SPX could definitely run higher. I'll be watching resistance on my ES 15min chart but if it breaks, then I'm not seeing any obvious reversal level below 1150 SPX really.

What's worth noting at the moment though is that we don't yet have a break of the IHS neckline on the SPX daily chart. If we see a reversal below it before the market opens then there is still a significant chance of a short term reversal here. We are most definitely short term overbought. If we gap up above the neckline at the open though I'll be expecting to see a further run up in the next day or two.

There are a couple of external factors to note here. Firstly it is quadruple witching opex today, and the market often trades in a narrow range on such days. Statistically that does also leave us with a traditionally bearish week next week though all eyes will be on the Fed next Tuesday, when they will either announce the heavily trailed new QE push, which would be bullish for equities, or they won't announce one, which at this stage would disappoint a awful lot of people.

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