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Wednesday, 23 November 2011

Thanksgiving Thoughts

This will probably be my last post this week, unless Friday morning looks particularly interesting, as the markets are closed in the US and only open briefly on Friday. The markets are open elsewhere of course, which is worth bearing in mind on the forex markets particularly, and obviously everything's still open here in Britain, where for some reason the successful secession of the US from the British Empire has yet to be given the status of a national holiday.

I always think of my family links to the US on Thanksgiving, as my paternal grandmother's family were very prominent in early New York, and my ancestor Stephanus Van Cortlandt was the first native born Mayor of New York. It went downhill from there as his grandson Cortlandt Skinner, after being Attorney General of New Jersey and Speaker of the provincial Assembly, was a prominent loyalist general in the War of Independence. When the Brits lost he was forced into exile, losing all of his holdings in the US. I still have the original maps showing how much of Long Island was divided up within the family and look at it wistfully on occasion.

Backing the wrong side has a cost of course and General Cortlandt Skinner was just following a family tradition, as his father Reverend William Skinner fled to the US after one of the Jacobite rebellions in Scotland. He was a MacGregor, and the Gregor clan was proscribed in 1603, when King James I banned the clan name and made it a death penalty offence to use it. Skinner was one of the names that members of the family took during this period of proscription, which lasted until 1774 when the ban was lifted.

I was saying yesterday that a significant bounce wasn't likely to happen on equities unless we saw 30yr Treasuries (ZB) and USD (DX) break support, and that didn't happen. On DX the resistance trendline on the current rising wedge was touched overnight and we may therefore see some retracement there today. I'm currently leaning towards seeing this 70% bearish rising wedge break up, though a break down through the wedge support trendline should be respected:
I'l post the chart on GBPUSD as it provides a cautionary example of the dangers of playing counter-trend bounces in strong downtrends. You can see that after hitting the wedge support trendline, it has since bounced twice on the same trendline lower down without any return to wedge resistance. EURUSD has broken strong support at 1.343 overnight and that looks bearish as well:
On 30yr Treasuries channel support was tested yesterday and then channel resistance was reached overnight. ZB is retracing from there at the moment, but there's nothing much happening on the bull side on equities really until ZB breaks the strong support trendline for this move up:
ES broke strong support at 1180 overnight, and has traded as low as 1166.75 overnight. I'm seeing 1180 as strong resistance today, particularly as declining resistance is now just above there. I have falling wedge support at 1155 today and that is also the classical target for the broken symmetrical triangle of course. If ES doesn't break declining resistance, we could well see that today:
On the SPX chart I've been dusting off my range levels for the August to mid-October trading range, as we're now well back into it. I have SPX divided into range levels over that period with those ranges defined through a close into the next range having always led to a hit of the following range level. I have levels at 1178 and 1140, and a close below 1178 today would therefore suggest that 1140 should be tested before any serious bounce. We'll see if that still holds true now:
Last chart of the day is oil, where after another look I have redefined the broken channel as a broken rising wedge. That opens up the possibility that CL will now retrace all of the move from 75, but the initial target is still strong support in the 89-91 area, with the little H&S target at 92.5 of course:
Overall I repeat what I said yesterday, which is that in the absence of breaks of the strong support trendlines on ZB and DX, we aren't likely to see a strong bounce on equities. EURUSD breaking strong support at 1.343 overnight was also not a good sign of the bull side. I'm expecting strong resistance today on ES at broken 1180 support and the declining resistance trendline just above. A break of those with confidence would look bullish, but wouldn't be likely to last without those support breaks on ZB and DX.

One last thought for the day. I sent an assessment of a UK company, Icap, to my brother the other day, and though I thought I'd made the explanation clear and simple, he told me that he couldn't understand it, and that he thought it would be incomprehensible to anyone without a detailed knowledge of charting terms. He might be right and I've been wondering if I should write a glossary to make these posts more accessible to non-chartists. Any comments welcome.

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