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Tuesday, 17 April 2012

Bullish Overnight

I was expecting consolidation yesterday followed by continuation down today, but that's not what the charts are suggesting this morning. Dow closed up yesterday as the stats suggested, but Nasdaq had a strong continuation down day. The support trendline of the NQ declining channel was hit and overnight there was a slightly lower low on positive RSI divergence. This is a bullish setup short term and suggests a move to test channel resistance in the 2725 area, with some shorter term declining resistance in the 2690 area
On SPX there was some choppy sideways consolidation yesterday but there are two reasons to think that the short term direction for today will be up. The first is that a declining channel formed from Thursday's high on SPX, and then broke up yesterday afternoon. SPX slid afterwards but together with the positive divergence on the 15min RSI at the low yesterday, that has a bullish lean to it today:
The second reason to lean bullish today on SPX is on ES, where there was a marginally lower low overnight on strongly positive 60min RSI divergence. That was within an overall W bottom which would target 1391.25 on a break over 1375.25 today. This looks distinctly bullish though the upside target only triggers on a break over 1375.25, and there is obviously declining channel resistance in the 1380 area:
Just to complete the bullish equity setup here ZB has now broken the rising channel and looks ready to retrace. Strong support levels are in the 140 and 139 areas:
I've been saying for weeks that I have serious doubts about the immediate bear scenario on EURUSD as USD has not yet reached my retracement target in the 78 area. I suspect that the EURUSD rally from January has peaked but the strong rejection of the H&S neckline break on EURUSD yesterday doesn't inspire any confidence that the H&S will play out. We'll see how that goes but I have an indicator for weakness that looks better on the GBPUSD chart. Short term on EURUSD it's looking short term toppy with negative 60min RSI divergence. If we see any more upside today the next target would be the last high at 1.3213:
The GBPUSD chart should however give a better indicator of when the USD bullish trade will start to look interesting. That chart has a perfect rising support trendline from the January low, and as and when that breaks it should give a definite signal of USD strength. In the meantime GBPUSD has bounced very strongly from that trendline yesterday:
Overall I'm leaning bullish on the charts today, though we may well see some early weakness, which would look like a dip worth buying. A break below the overnight ES low at 1359.25 would weaken the bullish setup here. I have some stats for Opex week courtesy of the team at Mr Topstep, and they are as follows:

Monday                                                 up 16 / down 7 of the last 23 occasions
Tuesday                                                 up 16 / down 7 of the last 23 occasions
Wednesday                                            up 14 / down 9 of the last 23 occasions
Thursday                                               up 11 / down 12 of the last 23 occasions
Friday                                                    up 14 / down 9 of the last 23 occasions
Monday (after)                                       up 15 / down 8 of the last 23 occasions

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