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Thursday, 9 September 2010

SPX Resistance Tests

I said I was low on conviction yesterday morning and SPX failed to close flat or down. That is irritating because it means that the broadening ascending wedge indicating to 1077 ES has failed to reach target, and I currently have no short term channels or patterns on ES / SPX giving a strong indication for the next move.

That was a significant reversal though. I'm watching to see whether we have another move up today and if we do then I'll be expecting a sharp reversal down next week. I don't have a target yet for that reversal but I see this morning that would fit with Pug and Alphahorn's predictions yesterday that we would see a move  up towards the 1110 - 1115 SPX area this week before a retracement next week into the 1064 - 1073 SPX area. They've both been right on the mark in the last couple of weeks so that is worth taking very seriously, though Pug is seeing a possibility today that we have already peaked in the short term.

If we do see that move up today there are a couple of points worth noting on the SPX charts. I posted a chart of the SPX 1040-1105 range the other day, and I included on that the declining resistance trendline from the April high, which is where this upswing has faltered since the trendline was hit on Friday. Here's the updated version where you can see that the trendline was hit both on Friday and yesterday, and held both times. If we see a significant close up today then this very significant resistance trendline will be broken, and there is a significant risk that we will overshoot towards the key resistance level above in the 1130 SPX area:

There is some limited chart support  for an overshoot if we see a move up today. I've not been getting a lot out of the SPX 60min chart so far on this latest move up from 1040 but the action since Friday does have the look of a high and tight bull flag that would indicate to the 1130 - 1135 SPX area. I also have rising resistance on a very tentative and very steep rising channel from the recent low, though I'll won't be taking the channel seriously unless we get a hit and bounce at the currently very speculative lower channel trendline early today. It is a thought-provoking chart though:

I have a number of interim top indicators that I'm looking at and none of them are indicating that the next major top is here. and a hit of the next likely interim top level won't happen this week unless we do see a very sharp move up. I won't post the updated versions of my SPX:Vix and EEM charts today, but one of the others that I am watching most closely is the 30 year treasuries chart.

As you can see from the chart, we have a strong rising channel, though not a well confirmed one on the upper trendline yet, and we are currently seeing a retracement towards the lower trendline of that channel. In that retracement we now have a perfect declining channel and we could possibly see the lower trendline of the main rising channel hit in the 130'24 area if we saw a big move down from 133'04 at the time of writing. That's a big move but we've seen several huge daily candles on this recently, with several larger than 2 and one over 3, so it isn't inconceivable:

There is a big year-old pattern on AUDUSD that I have posted before, and from the 24 hour forex charts the next upside target is at 93.85. If there isn't a bullish breakout from there then the next downside target would be in the 75 area on this pattern, which sounds very ambitious, but back in April I recommended shorting AUDUSD on the basis of this pattern for a 1000+ pip drop, and we got it. At the least a short from the top of this pattern is a very low risk / high reward short and if we do see a reversal at the top of the pattern, that would be a very bearish indicator for the general market and commodities just as it was at the last reversal in April:

I've been looking very hard at the EURUSD chart for an indication whether it is in an intermediate term downtrend or whether we've just been seeing a correction within an intermediate term uptrend. That's hard to say unless we get a conviction break of the key support and resistance levels on it, which I would see at 1.248 for support and 1.30 for resistance. In the short term though I've found a compelling declining channel from the recent high that suggests more short term upside if resistance at 1.273 can be broken:

I see that ES has moved above 1104 as I've been writing, and so is above yesterday's range. If that can be sustained until the open then a gap out of the previous day's range has a high probability to run further in the direction of the gap. If so the odds would then favor a continued move up with a gap fill, if we see one, late in the trading session. We could then see the strong upward move that I have been speculating about and if we do hit the key interim top targets today or tomorrow I will be posting that here as we hit them.

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