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Wednesday 30 November 2011

Tweezers and Cannon

Yesterday turned out to be a consolidation day and ES retraced back to 1183 overnight. Since then it has bounced to slightly over yesterday's overnight high on some mildly bullish news about Chinese reserve requirements. The article about that on Bloomberg is here, and is interesting as it's the first reference I've seen to government 'fine-tuning' in a while. That's a phrase that has grown rare in recent years as central banks have graduated from using fiscal tweezers to fiscal cannon to try and move economies.

I'm expecting a green day today but it's hard to say how far this will get. On SPY the IHS I posted yesterday is still in play though the neckline was mashed up somewhat yesterday which weakens it. Big resistance in the area of yesterday's highs at the 50 day SMA on SPX. Big resistance too in the 1210-20 area on SPX which will be hard to get through:
On IWM the action yesterday was looking like a bull flag:
On NQ the declining channel I posted yesterday is still holding, though the upper trendline has been retested again since I capped the chart. Interesting that while ES has beaten yesterday's overnight high, NQ has not and neither has TF as yet:
The H&S I posted on DX was badly battered yesterday. DX broke back up through the neckline and almost went higher than the top of the right shoulder. If it makes a higher high than that then I would write this H&S off but at the moment it's still in play, just:
EURUSD is just chopping around at the moment but the bullish setup on GBPUSD still looks strong. The broken falling wedge trendline and rising support from the low were both retested overnight. Still looking good on the long side there:
On 30yr Treasury futures (ZB) I was looking at a triangle and since I capped the chart that has broken down. At least a retest of 142 support looks likely which is modestly bullish for today:
To finish off the post today I'll post a couple of interesting looking charts on instruments that I don't trade much. The first is the nice looking double top on German bunds that George Cavaligos of Naked Trader mentioned to me the other day. A break of 133 support would give a double-top target of 126.50 so this is an interesting looking short. Would that be bullish for equities? Possibly, though declines in other european sovereign debt values lately haven't been of course. This might just be a decline to reflect the decreasing creditworthiness of Germany as it slides further towards guaranteeing the sovereign debt of the P(FB)IIGS:
The last chart is an eight year weekly chart of USDJPY, which is the inverted Japanese Yen vs USD. There's is a very nice falling wedge suggesting a big rise in USDJPY (and therefore decline in Yen) may be coming soon. I'll be watching for a break of the resistance trendline, as if ever a currency both needed and deserved to be weaker, that is JPY, with Japan swamped by debt, and with the famous Japanese export surpluses now wiped out by the strong Yen:
I'm leaning towards seeing a green close on SPX today, but with a gap up likely that's not a particularly ambitious expectation. If SPX reaches 1210-1220 resistance I'll be watching to see what happens there. If this is just an oversold bounce we're seeing this week, and I think it probably is, then it may well fail there.

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