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Wednesday, 13 October 2010

Onward and Upward

Well as ever lately, yesterday morning's decline didn't last, and FOMC boosted ES to a new high. The low on ES was parallel to the upper trendline of the possible broadening top on ES, so that is now a rising channel. Overnight we've risen close to the top of that channel and I'm looking for a reversal in the 1175 - 1177 area.

On that basis I'm thinking there's a reasonable chance of a gap fill today, though I note that MasterTheGap are saying in their free daily email that 'fading gaps that occur on a Wednesday of Options Expiration week following a new 50 day closing high has only resulted in 1 winner out of 5 for 'up' gaps' For anyone that doesn't receive this free daily email I'd strongly recommend adding it to your free subscriptions:

Looking at the bigger picture, we've now broken declining resistance from the Oct 2007 high through the April high, my smaller SPX channel that I posted yesterday was pinocchioed through yesterday and looks likely to break this morning, and if SPX opens over 1174 then the post flash-crash high will also have been taken out. The next significant resistance I'm seeing is in the 1200 area and it doesn't look that strong of itself.

I said yesterday that I didn't like the level on USD for a reversal and EURUSD has broken recent declining resistance this morning. I was also interested to see that yesterday's decline confirmed the lower channel trendline of a potential rising channel which looks bullish and gives a target in the 1.4225 to 1.425 area for another move up. That should fit well with a hit on my USD key support level at 75.75:

One chart that does still look bearish, even if rising wedges have been tending to break up lately, is the /TF chart where there is a nicely formed rising wedge from the August low. Thanks to bloodwine for pointing this out to me yesterday as this is definitely worth watching, as well as offering some decent trading opportunities trading the trendline hits:

I was looking through some charts yesterday and hooked out a couple that I've posted in the past that looked interesting. The first that I'd like to repeat is the SPX daily 20sma chart, where the last significant reversal found support at the 20sma, as is often the case:

The other chart is a chart I posted a few weeks ago showing a possible bearish gartley pattern developing on SPX. Keirsten pointed it out and I mentioned then that the pattern target for this upleg would be in the 1175 SPX area. This a good day to hook this out as we're there now, though I'm not suggesting that I'm expecting a serious reversal here. The pattern target is plus or minus twenty points or so though and I am seeing very significant levels coming up elsewhere in the next few days:

I won't post the charts for that possible reversal level today as I've been rationing myself to five charts a day lately, but I'll post them in the next day or two. The potential triggers for the reversal though would be USD reaching the very key rising support trendline in the 75.75 area, and copper reaching a key resistance trendline in the 392 - 4 area. Those might only mark a short term high of course, but I'm expecting to see something happen there.

There is something else to mention as well. I was talking to someone yesterday (who doesn't want to be named), and they observed that there is a very significant swing high or low in late September or October almost every year going back a very long way. I charted this for the last thirty years yesterday and he's right. We haven't seen that significant high or low yet, and there's every reason to expect that we will. If we reached 1195 and then retested the IHS neckline at 1130 that would be good enough to qualify but it could be a bigger reversal of course. I'll be doing a full review of the last thirty years of these October reversals this weekend.

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