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Monday, 2 April 2012

Mixed Signals Overnight

The immediate picture was looking distinctly bullish at the open of the overnight session, with a sloping IHS breaking up on ES, bonds looking bearish and EURUSD seemingly poised to break up. Some of that bullish picture is intact, but ES retraced to trash the IHS and break initial rising support, so the overall picture is in doubt. ES has established a rising channel from last Thursday's low at the overnight low so far and as long as that channel holds I'm leaning bullish, with a break over declining resistance at 1408.75 needed to confirm that the short term trend is still up. On a move below channel support at 1401.5 I would lean bearish and see where that goes today, with a break below Friday's low at 1395.75 opening up a test of Thursday's low in the 1386 area:
On the SPX 15min chart I have a provisional rising channel established from the March 7 low at Thursday's low, and a break below that would look bearish. I have that support in the 1397 SPX area. One interesting thing to note on this chart is how Thursday's low was a perfect retest of the declining channel / bear flag that broke up on Monday morning. If we do see a break downwards today I would be looking for the next low to be signaled by positive divergence on the 15min RSI, as that has been working very well over the sideways action over the last few days:
I was looking at XLF this morning, and to me that is saying that more consolidation is likely. You can see the nice rising channel off the December low has hit resistance and it has been forming a short term double top on daily negative RSI divergence. At the very least this gives some reason for caution on the long side:
I posted a EURUSD chart on twitter yesterday night and it's still current now so I'll add it below. On this chart I'm looking at the possibility of a continuation IHS within the current rising channel, and within the context of the larger reversal IHS that I've been following for weeks as it formed and broke up. I'm leaning bullish on EURUSD unless we see the current rising channel break, and support there is in the 1.33 area this morning:
The bullish short term picture on EURUSD fits with my bigger picture bullish chart on USD, where a much larger IHS is forming, and I'm looking for a hit of the lower trendline on the USD rising channel before a strong reversal back up that should last the rest of the year:
On ZB the rising support trendline broke on Friday and a possible rising channel was established at the low. That broke down overnight and I'm leaning cautiously bearish. It's bouncing strongly at the moment and a conviction break of 137 is needed to signal continuation of the downtrend. My bigger picture on bonds looks very bearish here:
As I've been writing the ES rising channel has broken and I'm now leaning bearish for this morning. We'll see what the bears can do with this initial weakness. It's worth noting that the first day of the month leans bullish, Mondays lean bullish, and Dow has been up 14 of the last 17 first trading days in April. This last stat comes from the free blog at Stock Trader's Almanac, which I check every morning and you can see here.

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