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Monday, 30 July 2012

Possible Bull Breaks

We saw some big moves last week on the basis of talk by Draghi, backed up by Merkel, that the ECB would take whatever action necessary to save the Euro. Talk is cheap though and Merkel hasn't yet confirmed that she will accept the ECB printing money to save sovereign EU nations in trouble. I suspect she won't, and unless she does this move doesn't look likely to last long. Be that as it may some interesting things happened from a technical perspective last week so we'll go through those.

On the SPX daily chart the SPX closed at the upper bollinger band on Friday. This is an obvious time to look for some retracement though I note the overnight action on ES looks like a bull flag so far. If a new uptrend has started then there should now be strong support in the middle bollinger band and 100 DMA area around 1360:
On the SPX 15min chart I posted a chart on twitter on Friday night showing a perfect rising wedge from Wednesday's close and marked negative divergence on the 15min RSI. Some retracement looks close:
On the SPX 60min chart the low last week established the lower trendline of a rising channel from the June low. Until this was established the lack of a support trendline looked bearish. Not now though and only a break below this channel will put me back firmly into bear mode:
There were significant looking breaks on related markets last week as well. On USD the support trendline from April broke intra-day. If that follows through then the next big support levels are at 81.5 for the IHS neckline and 80 for rising support. It's worth noting here though that if the ECB starts printing lots of Euros that should be bullish for USD
The reversal on TLT looks ominous. Rising support from April broke on the 60min chart and there's a potential double-top on the weekly chart, with a marginal new high on negative RSI divergence. Strong support is still at 124 but if that breaks I'd expect a test of the main rising support trendline in the 117 area:
Copper is still unimpressed and continues to form the bear flag that has been forming for several weeks now, within the context of the huge H&S forming there:
I'm still not convinced that any bull breakout here has legs but we'll see. Short term I'm watching the rising wedge on the SPX 15min chart for the retracement that we'll most likely see soon. Longer term if the bears are to regain control then the rising channel on the SPX 60min chart will have to break down.

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