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Monday 30 January 2012

Cautiously Bearish

This retracement on equities isn't breaking any speed records so far, and probably won't. However it looks encouraging and I thinks there's a decent chance that it will reach rising support from the November low, which would be in the 1275 SPX area today. On the SPX 60min chart that would confirm the lower trendline of a rising wedge and deliver an upside target range after the bounce at wedge resistance, which would be very nice to have:
120130 SPX 60min Trendlines

You can see exactly the same rising wedge on ES, which strengthes the setup. One thing i've added on ES that's worth noting for today is that it has bounced at a potential H&S neckline overnight. The ideal right shoulder high would be in the 1318.5 area, and I'll be watching for that if we see ES trade back over the very short term resistance levels that I have at 1306 and 1307.5:
120130 ES 60min Trendlines
30yr Treasury futures are looking encouraging for further retracement on equities. The resistance level at 143 that I was watching on Thursday and Friday broke up and the obvious next move for ZB is a test of the last highs in the 145'10 area. ZB has formed a rising channel from the lows and a break downwards from that would be a strong signal that this bounce on ZB has finished early:
120130 ZB 60min Range Break and Rising Channel

Copper futures are also looking encouraging here for short term equity bears. I showed a chart with HG breaking over 390 area resistance on Friday morning. It had reversed back under 390 by the end of the day. Support levels are in the 376.5 area, the 360-5 area and rising support from the lows in the 340-5 area. If that lower target can be reached that would be a very nice long entry with an easy stop below the rising support trendline:
120130 HG Daily Trendlines and SR Levels
EURUSD is at an interesting level here. Obviously the immediate uptrend is intact as long as the rising channel from the lows holds, but there's some reason to think that it might now break. There's increasing negative divergence on the 60min RSI, and an H&S may well be forming with the neckline at 1.308 support. EURUSD is at 1.3107 at the time of writing and I'll be watching for a bounce there.If the rising channel does break down, then it's also worth noting that an IHS may be forming at the 1.32 neckline. The ideal right shoulder low would be in the 1.286 area, and if an H&S forms at the 1.308 neckline, the target would be in the 1.293 area which is a support area:
120130 EURUSD 60min Trendlines
Oil futures have been kicking round in a narrowish range for a few days, and that has taken the form of a rough falling wedge. I'm leaning short overall, but if the falling wedge breaks up I'd be looking for a test of the last highs with another test of broken support from the October lows. On a break down the obvious target is in the 92.9 area:
120130 CL 60min Trendlines
I'm leaning bearish into Wednesday but there is a distinct possibility of a strong bounce on ES for part or all of today. A break below 1300 would eliminate the H&S scenario I've suggested on ES, and a move over 1307.5 would strengthen it. I'm watching EURUSD carefully as a retracement here would really help a retracement on equities along, though if an H&S is forming on EURUSD we might well see a bounce there as well into the 1.318 area to make the right shoulder.

I've made a few changes to the blog in recent days. I've added advertisements and also taken the domain name www.channelsandpatterns.com. This is a precautionary move really, as I remember when Xtrends tried to buy the Xtrends domain, someone had beaten them to it, so they were reduced to buying the relatively unnappealing Xtrenders domain instead, as an alternative to paying a large sum to the cybersquatter sitting on the domain they should have registered earlier. I've no idea whether advertisements will bring in enough money to be worth collecting but they might, and it will be interesting to find out.

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