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Friday, 27 January 2012

Short Term High Made I Think

I sent the following tweet out shortly after the highs yesterday morning:

If we are going to see a reversal on SPX soon, odds favor the high this morning. Hit the top SPX rising wedge. Hit support Vix falling wedge.


After the retracement yesterday I think the odds are excellent that a short term high is in, and my retracement targets on SPX would be a test of support in the 1305-10 area, though that would be disappointingly shallow, then a test of rising support from November in the 1270-80, and if that was broken then main support from the October low in the 1250-60 areas. Those last two targets have ten point ranges because they are moving targets, and the exact target would depend on when those trendlines were reached. The lowest risk long entry IMO would be at the test of rising support from the November lows, with a stop below the rising support trendline from the October lows:
120127 SPX 60min Trendlines

Much depends on the GDP figure this morning of course and if that figure is good then we might discover very shortly that the short term high is not in. I'm expecting an indifferent figure at best though, as if the figure was going to exceed expectations, I think the Fed would have been less doveish on Wednesday.

Subject to that the setup for a retracement here looks very nice. Obviously the rising wedge shown above is breaking down but on the spike down yesterday the lower trendline of a potential huge falling wedge on Vix was hit and confirmed. The open gap just above that was also filled and the overall setup on Vix now looks extremely bearish. Short term, falling wedge resistance gives us an upside target slightly under 22 for any bounce here, and if that wedge resistance trendline breaks, that will be a strong signal to get out of equities:
120127 Vix Daily Falling Wedge

Is this (probable) interim top a major top? I'm thinking not on balance though it's possible. I'll show the MSWorld (ex USA) 10yr chart here as it expresses very well the ambiguous overall setup here. In essence one could view the 2011 lows as a retest of broken resistance from the 2007 high (bullish view) or as the completion of the head on a monster H&S pattern (bearish view). On either view there would be reason to think that this move up from the October lows will run further. There's a lot of interesting information on this chart so take a closer look if you'd like to see that:
120127 MSWorld Weekly 10Yr Overview

I showed the two key resistance levels on copper futures a couple of weeks ago in the 375 and 390 areas. 375 was broken last week and 390 has broken overnight. That looks encouraging for equities and I've marked the next resistance levels on the chart:
120127 Copper Daily Resistance Breaks

30yr Treasury futures have been looking a bit confused and lost since the spike up on Wednesday's Fed announcement. The options look clear enough though and the current trading range is between 141'24 and 143. An hourly close above would invite a retest of the last highs in the 145'10 area. An hourly close below would invite a retest of the last lows in the 140'20 area, and on a move below that to significant support in the 139'25 area. For obvious reasons I'm leaning bullish on ZB:
120127 ZB 60min Levels
 
EURUSD retested broken resistance at 130.8 overnight and that is now clearly immediate support. Immediate resistance and a possible larger IHS neckline is in the 132 area, and I'm expecting more consolidation until  the lower trendline of the rising channel is hit. The outlook on EURUSD looks bullish unless that rising channel breaks:
120127 EURUSD 60min Setup

 Last chart of the day is the updated gold chart where gold has now broken back above the support trendline from early 2011. The last week's action on gold looks very bullish and gold is back on buy the dip as far as I'm concerned:
120127 Gold Weekly Bullish Breaks

As I'm writing I see that we are only three minutes from the GDP figure so we'll see how that goes. As I mentioned yesterday the stats for yesterday were bearish and the stats for today are bullish. We may well consolidate today.

After a few requests I finally got round to adding to advertisements to my blog two days ago. That's raised about nine bucks since then which is more than I expected.  If this increases considerably I might even find myself making minimum wage for these morning writeups, which is an exciting prospect. :-)

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