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Wednesday, 13 July 2011

Trendline Deserts and Precious Metals

Everything in life tends to ebb and flow, and trendlines on charts are just the same. Sometimes you're spoilt for choice, and at other times there's not really much to see. That's the case on equities this week so far, and all I have that looks interesting really is a triangle on ES that is now breaking down:
On the SPX 15min chart I have a falling wedge that may be forming, but I'm somewhat doubtful about the lower trendline. A reversal there this morning would strengthen that considerably though, and if we see that then we will have a decent pattern:
So far, so boring, on equities at least, and there's little else to see this morning so I'm going to concentrate on USD and precious metals for the rest of this post. On USD I posted the gap up out of the big UUP falling wedge yesterday and I am going to show the smaller triangle there on the 60min chart today. This is a classic technical long setup, though obviously there is a lot of geopolitical noise with this trade:
Precious metals are looking very interesting this morning, with gold on the verge of breaking the May high. Gold futures are in a tight rising channel and will start to look interesting as a short when that rising channel breaks down:
On the bigger picture I have gold in a broadening ascending wedge from the end of 2008. That wedge has a decent support trendline that's currently in the 1375 area. That may not be the main support level however as you can see that the daily 150 SMA has held on the last six retracements including the last one at the beginning of 2011. The support trendline from that Jan 2011 broke in June and is now being retested. It may well hold. If it doesn't hold then main overhead resistance is in the 1630 area:
Silver may be forming an IHS on the 60min SLV chart. This is an interesting development as if it plays out then it might propel SLV over open gap resistance at 38. That would open the way for a larger bounce and is particularly worth mentioning this morning as on the silver futures (SI), this IHS is now fully formed and has broken the neckline. SLV may well therefore gap over this neckline at the open
On the bigger picture on SLV, SLV is trying to recover the broken support trendline from last year. There's big resistance here, but that SLV has managed to trade above this trendline at all in the last few days is encouraging for bulls:
Short term on equities I'm looking for a short term low here. We might have seen that already, but equally we might make a lower low on positive divergence on the 60min chart. Bonds are saying that the low is made or is close, and I'm expecting equities to hold up ok in July. Short term the broken triangle on ES is arguing for a red day today but that might just be an inside day within yesterday's range.

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