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Thursday, 16 February 2012

Rolling Over

I was saying yesterday morning that a pinocchio through trendline support was generally soon followed by a more definite break, and we then saw that hourly close below rising support from the December 19th low that I was looking for:
120216 SPX 60min Rising Support Break
That isn't enough to preclude a new high, but it is a strong indication that the short term high is in, and initial resistance today is at that broken support trendline. If that holds we can expect more downside to follow swiftly. SPX bounced within a few ticks of the previous day's low however, and ES bounced at last Friday's low overnight so there is an open possibility that H&S patterns are forming, and that we will put in the right shoulders on those patterns today. I've looked at that on the ES 15min chart where the neckline is at 1334 and the likely right shoulder high would be at 1348 resistance, with a possible overshoot to match the left shoulder into 1252.75 area resistance. A break with conviction below 1334 should eliminate this possibility:
120216 ES 15min Poss HS Forming
Ideally there would be no H&S and 1334 ES would be broken swiftly today. If we fall directly from here, which would confirm the bearish engulfing candlestick that is obvious on the SPY daily chart, though for technical data reasons not on the SPX daily chart, then I have a series of support levels / targets for this retracement:
120216 SPX Daily EW Count and Support Levels
I've marked up the main EW counts on the chart above as well, and they are (bullish count) that we have completed a third wave up from the October low and are starting wave 4, and (bearish count) that we have completed an ABC correction from the October low. Wave 4 cannot cross into Wave 1, so on the bullish count SPX could not fall below the October high at 1292.66. I have a number of targets in the 1290 to 1315 area, and ideally we would see a retracement into that area to provide ideal long entries with stops below the October high. I'll be leaning towards the bullish count unless we see a break below the October high.

A couple of other charts are interesting today. EURUSD reached my target at 1.303 last night and blew through it. That was a major support level through to 1.30 and the prospects for EURUSD now look much more bearish. I've done a bigger picture daily chart with fib levels:
120216 EURUSD 60min Big Picture and Fibs
The other interesting chart is the Vix, where Vix closed over the upper daily bollinger band yesterday. A close back within the bollinger bands would generally be seen at or near a significant low, so the bears need to see more weakness on SPX today, and more strength on Vix. Bollinger bands notwithstanding I have marked up the obvious Vix targets / resistance levels in the 24 and 30 areas:
120216 Vix Daily Falling Wedge and BBs
I'm looking for more weakness today but it's worth mentioning that the middle bollinger band on SPX (or 20 DMA) is at 1331.14 SPX, and that is significant support. A reversal back up from there seems unlikely, but it's worth bearing in mind.

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