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Tuesday 10 January 2012

Breaking Up

The NQ rising wedge I posted yesterday morning was a model example until after the close. The wedge broke down early in the day, retested near the close and then what should have happened is that NQ fell away from the retest. Obviously both NQ and ES broke up overnight and while NQ has not yet broken over the rising wedge resistance trendline, I'm inclined to write the wedge off:
My EW buds Pug and Alphahorn have both been expecting a wave 5 move up to complete the current move and I assume that's what we're seeing now. Energy has been building as SPX has been trading sideways over the last few days, and a sort of triangle has developed on SPX, though I'm inclined to interpret it as a resistance trendline within the current uptrend. Unless we see a big move back down before the open SPX will gap up over that trendline. Here it is on the 15min chart:
In terms of the likely target of any move up here I'll repost the SPX weekly Ichimoku chart that I posted last week showing the top of the cloud just over 1300 and declining resistance from 2007 through the 2011 high just under 1325. I think that range is the obvious target on SPX and should fit well with the 2400-2450 resistance zone on NDX:
Looking at the ES the low yesterday has established a reasonable quality rising channel and rising resistance there is currently in the 1302 area:
I do have some resistance lower on NDX. Looking at that this morning a reasonable quality rising channel has formed from the late December low and resistance there would be in the 2375-80 area today:
Two other charts today. The first is on CL, which bounced strongly at 100 yesterday and is now testing the broken support trendline. A move back above it would look bullish. What's also worth noting on the chart is that the low yesterday established a new support trendline which could be a sloping H&S neckline, but is worth watching as the new support trendline regardless:
The last chart is a very thought-provoking XLF chart. I've been posting this six year XLF chart periodically over the last few months to show that the key resistance trendline on XLF is declining resistance from the 2007 high. I last posted it just after the trendline was tested in late October I think. Interestingly XLF has just broken up through that resistance trendline and while it may retrace back underneath it soon, this is a strong sign that financials may now have bottomed out. That is obviously very interesting and has big implications. Going through some individual financial stocks has also thrown up some strong reversal charts. The W or double-bottom on the JPM chart as an example is well worth a look and I'll be watching that as it approaches the double-bottom neckline:
Equities are in the dying stages of a big move up, and when this move ends we should at least see a decent retracement. What happens after that will be interesting. Obviously the usual indicators for a new bull market are mainly showing strong negative divergence relative to equities, those being copper, the Euro, bonds etc. Could we see a new bull market in US equities regardless? Possibly, we'll see what earnings season brings.

Short term this break up looks significant and I'm expecting to see more upside before we put in a significant interim top that should be in the 1300 - 1325 range on SPX. We may well see some early weakness today. The pattern in recent days has been weakness in the morning and strength in the afternoon. We'll see whether that holds now that SPX is gapping up over resistance. If so we might well see a retest of that broken resistance near yesterday's close.

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