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Monday, 7 November 2011

All About Euro News

The markets are very sensitive to Europe at the moment as we all know. Just this morning we've seen ES move up ten handles on news that Berlusconi might be forced out tomorrow, followed by a sharp six handle fall when he denied the rumor. It looks like he might well be forced out in any case tomorrow though which looks positive as far as it goes.

I mentioned on Friday morning that I'd feel more confident about an extended bounce once ES broke 1260 with any confidence, and that's still the case. Until that happens this bounce may well fail and we might see a drop to break last week's low and test 1200. The hammer candle on the SPX daily for Friday's inside day wasn't bullish, though SPX is still holding the 20 SMA, which is the middle bollinger band, and that's positive as far as it goes:
On the SPY 60min we might still have an H&S forming. It would need to fall fairly quickly after the open today though as the right shoulder is looking extended now:
NQ like ES is stalled at the first decent high after last weeks low. A break up would look bullish and the broadening formation that has formed since that high is suggesting another test of that high:
TF is stalled at a declining resistance trendline and might be forming a triangle from last week's low. The importand support level at 738 didn't hold that well on Friday which looks a bit weak:
The star of the show currently is EURUSD of course and that frankly looks worrying for the bull side here. The move down from the highs was very impulsive, and the bounce since has looked very corrective. The rising channel that has formed since the low could be a big bear flag and while EURUSD has bounced on the Berlusconi news this morning, the break below 1.37 before then looks bearish:
GBPUSD looked stronger than EURUSD on Friday and still looks stronger. There's a clearer demarcation between the bull/bear case on GBPUSD with rising channel support at 1.594. There is strong resistance at 1.606 and GBPUSD will need to break that with confidence to move higher:
Vix filled the gap I was looking at on Friday morning and is holding strong support at 30 so far. This is an important dividing line for the bull/bear case here IMO. If Vix can break below 30 with conviction then a run up to test the October highs on SPX looks very likely. If Vix holds 30 then equities should beat last week's lows:
Last chart of the day is the GDX daily chart. I've been posting this every so often following the triangle there. You can see that there is strong double trendline resistance in the 68 area, and I think it might well get there. It would look a very attractive short there if it makes it, though that would also be a new multi-year high of course:
No conviction on direction at all today, though there are some decent lines in the sand to watch. ES is stalled at 1260, and a break above would be bullish. The same goes for NQ in the 2365-70 area, and TF in the 750 area. On EURUSD a break below 1.37 again would look equity bearish, as would a conviction break below 30 on Vix and a break above 142 on 30yr treasury futures (ZB). Overall I'm leaning slightly short and the overnight break below Friday's low on ES doesn't look encouraging for bulls so far.

I won't be paying a lot of attention for the rest of today as I have an old friend visiting from out of town.

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