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Monday, 1 August 2011

Bullish Beginning

It's the first trading day of the month today, and as I have posted before, that means that the stats today are leaning bullish. With ES up over ten points from Friday's close at the time of writing that doesn't mean that we will see much more upside today though. On ES last week's declining channel has broken up and a reversal IHS may be forming:
On TF last week's declining channel has also broken up and a reversal IHS may be forming:
On NQ last week's falling wedge has broken up and a much less pretty reversal IHS may be forming:
Have we seen the short term low? Obviously there is still some very serious news risk here as the debt ceiling talks may break down again, but SPX held the daily 200 SMA again on Friday and I think there's a very good chance that the low is in. SPX still hasn't reached rising support from the March 2009 low of course:
NYMO is also looking promising here. I was looking at the NYMO chart a couple of weeks ago thinking that was strange that NYMO hadn't reached -80 since the Osama top in May and that was reached last week. That doesn't mean that the last summer low is in but it does mean that we should start looking for it:
Vix is key here as after closing above the daily bollinger bands three days in a row last week, a close inside the bollinger bands seems more than likely today. If we then saw a lower close on Vix tomorrow we would have a Vix buy signal (for equities). One caveat to mention is that the overhead gap I've been watching has not been closed as yet:
DX reversed downwards hard on Friday from the nice looking bull setup I was talking about on Friday morning. There's a bull setup on EURUSD this morning, though it would require a conviction break up through broken rising support there:
I'm astounded to see 30yr Treasuries rising this strongly in a period where US default looks possible, and a downgrade of US debt by ratings agencies looks likely. Nonetheless the possible continuation IHS that I posted on Friday morning is now fully formed, and ZB has broken up through the neckline. This is worth watching as a big move up on ZB would normally be seen while equities fall, as was the case last week. I'm expecting a rally on equities so I'm expecting this break up to fail. Something to watch:
I'm doubtful that we'll see a moonshot on equities from here, but I think that, debt ceiling negotiations permitting, we are close to seeing a short term low that should be followed by a strong rally. It seems very likely now that there will be a debt ceiling deal, but it's worth noting that any deal will most likely not be finalised until tomorrow, and very possibly after the market closes tomorrow. We might see some uncertain chop until the deal is done. Short term I'm watching support on ES at 1300 and there is strong resistance in the 1312 area.

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