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Tuesday 18 October 2011

Fib Targets and AAPL

We had a trend day down on SPX yesterday and the daily candlestick was a bearish engulfing candlestick, so it should now be safe to say that this interminable wave up that we've seen from the lows has finally topped out. That candlestick and the trend day are both strongly suggesting more downside in the near future, though the powerful and largely uninterrupted nature of the move up from the lows suggests that this is now a corrective wave that is likely to be followed by another wave up that should beat last Friday's high. I've concentrated on looking at the likely fibonacci retracement levels on SPX, NDX and RUT today, and I've marked those on the chart. Here are the levels on the SPX 15min chart:
Here are the levels on the NDX 15min chart:
Here are the levels on the RUT 15min chart:
On the SPX daily chart I've also noted two levels that are worth watching on a daily close basis. Those levels are in the 1180 and 1140 areas, and whiler we've been trading these ranges over the last ten weeks no close above or below these levels (from the other direction) has not been followed by at least a test of the next internal range level:
EURUSD has now strongly reversed from the potential IHS neckline at 1.39 that I was highlighting yesterday and if that IHS continues to form then I'd expect a multi-day retracement into 1.35 support, with a possible overshoot into 1.335 support. Obviously if the IHS forms and starts to play out the upside target would be in the 1.463 area, which would support a strong rally into the end of the year:
Potential IHSes often fail to finish forming or near the neckline though, and there is another related market that's looking as though yesterday's reversal might be the start of a major move. I was slightly puzzled by the 30yr treasury futures low yesterday, as it broke through a support level without reaching the next one, and so I was looking for a reason that might have happened and found one. The low on ZB established a rising channel. It might not last of course, but I'm watching the strong S/R level at 142 too see whether this bounce might have real legs. If 142 breaks then this move could take ZB to new highs. at should be bearish for equities, though the Stock Trader's Almanac has noted a tendency for bonds and equities to move together in the fourth quarter of the year:
AAPL's earnings are out today, after the close I think, and I'll post my longer term AAPL chart with the setup showingresistance just overhead. I understand that AAPL shares tend to spike and dump at earnings so it will be very interesting to see if the spike tags a major resistance trendline:
After a trend day in either direction, the next day or two are generally consolidation or retracement days. The ES 60min RSI is showing some positive divergence and I'm thinking equities may well bounce today. There is also a possible H&S forming on ES that would need a bounce for a right shoulder to form. San at Nifty Charts and Patterns has done an excellent shart showing the neckline at setup and you can see that here.

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