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Wednesday, 23 February 2011

Wave A Completed?

ES bounced at my 1310 target yesterday, though NQ overshot 2338 to bottom at the strong support zone in the 2315-2320 area. The first target on SPX has therefore been reached, and if the move since July last year was a rising channel rather than a rising wedge, the retracement is complete. I'm expecting a bit more downside however and and looking at the main SPX rising support trendline in the 1295-1300 area as the main retracement target, so I'm expecting a bounce and then another wave down to reach that. Here are the main trendlines on the SPX 60min chart:
That was a nice technical low on the ES 60min chart, and I'm expecting that to hold for today. It's worth noting on the chart that the bounce level is a potential HS pattern neckline, and that pattern has a target at 1277 ES. Reaching there would cause a lot of technical damage though, and I'm not expecting to see that. If the forming right shoulder matches the left shoulder however, immediate upside may be limited to 1323:
There was also a nice technical low on the NQ 60min chart, and there is also some immediate resistance above that could cap this bounce. That resistance is the broken support level at 2338, which I gave as my downside target yesterday:
The bounce might well go higher though, as falling wedges formed and broke up on both ES and NQ yesterday, and the targets for those are 1334 ES and 2365 NQ. Here's the falling wedge on NQ:
I'm watching copper as main main indicator for this decline, and the obvious target for this copper decline is 420. It hasn't reached that but positive divergence on the 60min RSI is arguing for a bounce here, which might take copper to declining resistance over 440:
I was arguing the other day that EURUSD was looking bullish and was unlikely to be contained in the falling wedge turned declining channel that I posted. Sure enough it has broken up, and the next target is declining resistance from the Nov 2009 high at slightly under 1.40. If that breaks I have a large void until the next upside target in the 1.47 area, but to break through 1.40 the main rising support trendline for USD would have to break, so a large move up from there on EURUSD would be expected:
I know the bears are celebrating this week but I'm really not expecting this retracement to last long. I've been working on some really nice longer term charts to show my upside targets in the next few months and I'll try to fit those in later this week. Pug's primary and secondary scenario targets are exactly the same as mine here though, and while we might both be wrong, 1295 looks like the downside floor to both of us for this retracement. Obviously if that breaks then the picture would look much more bearish. Leaning cautiously long for a bounce today.

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