- WE'RE JUST RANDOM SPECKS OF DUST IN A TORNADO TO THE MARKETS .......
- CHARTISTS MUST PUT ALL BIAS ASIDE AND LET THE CHARTS DO THE TALKING OR WE'LL SEE ONLY WHAT WE WANT TO SEE
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Friday, 29 July 2011

Debt Ceiling Carnage

Well we got the bounce I was expecting yesterday, but it wilted before it cleared 1315.5 on ES, and new lows have been made overnight. I'm very sorry to see that the TF declining channel didn't make it through the night. A sad loss, as navigating this decline just got significantly tougher. A shorter term declining channel of decent quality is still in play however:
On ES the apparent declining channel is actually a gently broadening wedge. As with the others ES is now showing very significant positive divergence on the 60min RSI:
There's a sort of falling wedge forming on NQ but the trendlines aren't strong enough to take much notice of this yet. NQ is still holding above 2350 on an hourly close basis:
EURUSD held the 1.427 area yesterday and retested broken wedge support. Overnight 1.427 has been broken on an hourly basis however and I'm expecting more downside from EURUSD:
Looking at the DX 60min chart, the likely shape of the EURUSD decline looks clearer. There's a nice looking falling wedge on DX that has broken up and retested, and a small IHS that has formed with the target at 75.60. Short term this DX chart is looking very bullish, and subject to the geopolitical rumblings this week and the GDP figures this morning, more upside for DX looks very likely today:
I posted the rising wedge on gold futures yesterday morning and that wedge has now broken down and retested. I'm expecting a reversal down for gold here, which would fit well with the move up on USD that also looks likely:
I've been looking at the 30yr treasury futures, and it is astonishing how well these have held up in a news-heavy week where the news has been a battle to avoid defaulting on US debt. ZB has been consolidating in a range since May and looking at the chart over the period, what this most resembles is a continuation IHS. I've drawn in arrows to show what I mean. IHSes often fail at the neckline of course, and this pattern may not complete or play out, but if it were to play out that would suggest more trouble ahead for equities:
The last chart for today is the daily SPX chart. This shows the progress of the possible H&S that is forming, and that SPX is currently at the bottom of the bollinger bands. Most importantly it also shows the daily 200 SMA, which held as support in June. That's in the 1285 SPX area now and that is the key support area for today if we see more downside:
There's plenty of positive divergence on the 60min charts, but overall the setup looks bearish for equities today. I'll be watching big support in the 1285 SPX area as very key. A break down from there would look very significant.

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