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Tuesday 19 October 2010

Push to 1201 ES?

In an ideal world the next few days would play out as follows. USD would fall to the strong support trendline at 75.75 while ES rose to a target in the 1200 area. They would trough and peak respectively on the same day and then reverse, with the obvious target for ES being at the IHS neckline in the 1130 area. It may not play out that way of course, and the reversal periods for equities and USD often don't coincide, but sometimes they do, as they did at the low in February, and with both close to decent probability reversal areas it may well happen that way this time.

On ES I know Pug is seeing a likely high in the 1200 area during the next few days and I have a rectangle on ES that is suggesting the same, with a target in the 1201 area. These break up 68% of the time though the rectangle is a bit sloppy to my eye, and the last rectangle that I saw on ES a few days ago broke downwards of course. This one won't break downwards unless we are to see a significant support break on ES, so I'm expecting that it is likely to break up:

In terms of support on ES and SPX, I have the support trendline on ES at 1066.5 ES at the moment, with the SPX lower channel trendline in the 1172 area. Those will obviously break downwards at some stage but I'm not seeing anything to suggest at the moment that the break is likely to happen today. Here's the ES chart from the August low:

On EURUSD  have a clear rising channel at the moment, with the next upside target slightly over 1.42 and support at 1.385. Support looks strong with four touches on the support trendline, but EURUSD has started a topping process by the look of it, and the next part of that process would be a break of that support trendline, but I'd expect even in that case to see a last spike up into the 1.41 area. Here's the current EURUSD rising channel:

Copper is very close to the upper trendline of the broadening top I've been watching. I've been looking at that carefully this morning, and I have the most likely location for the trendline at 390. There are only two previous touches to the trendline of course, and the first touch had a significant intraday shadow on the candle, so I've drawn in two other possible alternate trendlines and it is also worth noting that the target for the rising wedge that broke up is 405:

There's been a lot of speculation over the last few days as to where the amazing runs on AAPL and GOOG might find their next intermediate tops. I've looked at both charts and I don't really have a view on GOOG, but I have a rising channel on the AAPL weekly chart that suggests that the next reversal should be in the 335 area. That's worth noting as if AAPL reverses then Nasdaq should reverse too:

There are significant downside risks here and now though. While I've been writing GBPUSD, which appears to be topping out, has broken the recent channel support trendline and we're close to completing the head on what may well be a head and shoulders reversal pattern. If so however, I'd still be expecting a last move up to make the right shoulder of course. With EURUSD and GBPUSD both in apparent topping processes though, a bottom for USD looks close, and when it reverses it may well carry equities with it.

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