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Wednesday, 22 June 2011

Overbought Retracement

Too many interesting charts today, so I'll post a couple as links. The first link is to the SPX daily chart showing the possible H&S forming and a significant daily resistance level reached at the high yesterday and you can see that here. The second link is to the GDX 60min chart where the falling wedge I posted yesterday morning broke up beautifully and topped at a potential IHS neckline where a right shoulder retracement may now form. You can see that GDX chart here.

On the ES 60min chart the wedge resistance trendline at 1284.5 was broken yesterday and the wedge played out to slightly above the 1290 target. All the equity indices were heavily overbought on the 60min RSIs by then and have retraced somewhat overnight. I was watching to see whether the broken ES trendline held overnight and it hasn't, so I'm favoring a deeper retracement into the 1276 or 1270 areas:
It's the NQ and TF charts that leading me to think that we might see some deeper retracements today though. On NQ my first resistance level at 2215 was broken easily yesterday morning and NQ rose directly to my next resistance level at 2250. That level is a potential IHS neckline of course, and if we see a right shoulder form that shoulder would ideally bottom at a 2215 retest before playing out to the IHS target at 2315:
The TF rectangle I posted yesterday broke up nicely and is retracing at the time of writing. The obvious retracement target would be a retest of the rectangle top at 793:
On EURUSD the short term rising wedge I posted yesterday is still developing nicely. the next obvious move would be a retracement to wedge support in the 1.434 area. The greeks won their confidence vote yesterday, so the greek solvency issues may be kicked down the road a couple more months, though as the ECB are now discussing a technical default for private investors as part of the next bailout, we could see major issues for EURUSD return at any time:
Moving onto commodities I'm not at all certain that a significant low has been made. There's been no break up on copper and I'm still thinking that a test of big support at 395 is on the cards there:
On oil support at 92.5 has held so far on a daily basis, but it will be hard to be bullish on oil unless the H&S neckline at 96 can be recaptured with confidence. Until that happens the downside risk on oil looks extremely high here:
I posted a declining channel on SI (silver) last week and suggested that the obvious next move was to channel resistance on that channel. Silver has since been moving towards that trendline slowly within a smaller rising channel. This move on silver looks corrective and I'm expecting more downside after it completes. The seasonals on gold and silver favor a summer low near the end of August I think:
I'm treating any shorts on equities as counter-trend now and my retracement targets are therefore mainly decent entry levels to JBTFD. It is still worth bearing in mind though that the stats for this week are strongly bearish, as I posted on Monday, so there there is still a chance that this week could close down, though I'm not expecting that. I am expecting some choppy action though, which should deliver some good dip-buying opportunities. I'm not expecting yesterday's equity highs to be broken for a couple of days, but if we see them broken with confidence today then I'll be looking for 1311 on ES as the next major resistance area.

If the post looks slightly different today that's because blogger is having some issues this morning. I've had to write the post in typepad and copy it over, which has been interesting. 

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