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Tuesday, 14 February 2012

Topping Out

Shortish posts all this week I think as I'm a bit distracted offline. On SPX we have nice clean trendlines now, and those trendlines are suggesting that upside is limited and a more significant retracement is close. I wouldn't go so far as to call this a rising wedge on SPX, or if I did I would take it from the 1333 high and next 1300 low, as the long move from 1202 to 1333 without touching either trendline, was too long in my view to qualify the overall setup as a rising wedge. Support is in the 1340 SPX area and resistance is in the 1360 SPX area, and on a break of the support trendline I would see the obvious target at the rising support trendline from the November low in the 1305 area. Support to watch on the way there is at the middle daily bollinger band (20 DMA) in the 1327 area:
120214 SPX 60min Trendlines
One thing I am considering here is the possibility that a huge continuation IHS is forming on SPX. That will be something to bear in mind if we see a sharp retracement here followed by a quick recovery. Vix certainly looks bearish for equities here, as the huge falling wedge has now broken up and retested broken wedge resistance yesterday. Vix isn't a tradeable instrument really but this is showing every characteristic of a decent wedge at the moment:
120214 Vix Daily Falling Wedge Broken
It would help any retracement along to see some strength on USD and we are seeing that here, with EURUSD having now made a lower high and lower low. The H&S on GBPUSD that I posted yesterday is now fully formed and looks ready to break downwards. Here's the bearish looking setup on the EURUSD 60min chart:
120214 EURUSD 60min Retracement Setup
Oil hasn't been moving with equities much of late, and has been retracing for most of the January run up on equities. There's still a potentially interesting double-top setup on CL, but the break up through declining resistance yesterday was bullish and we may now see a retest of the last highs in the 104 area:
120214 CL 60min Declining Channel Broken
ES has recovered from early weakness overnight and looks as though it may retest the 1352.75 high. If it breaks up through that I'd be surprised to see a move over 1358 and any break up will look like a shorting opportunity.

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