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Friday, 10 August 2012

TLT Hits Strong Support

I've been leaning bearish for a couple of days now, and we haven't seen a significant retracement yet, but SPX hasn't bulled upwards either. On the SPX daily chart SPX is dropping away from the (still rising) upper bollinger band. If we see a retracement into the middle bollinger band then that is at 1373 today, and 1380 or below would count as a hit:
On the SPX 15min chart a triangle has been forming. It has a decent three touch support trendline so a break below that would look bearish. This could be a bull pennant but is too far away from Friday's flagpole to be a good one in my view. Rising (wedge?) support is in the 1375 area today:
On the ES 60min chart there's an interesting setup that looks like an H&S but, as the right shoulder is higher than the head, is instead a possible double-top with a target in the 1376-7 area on a break below 1390. Rising (wedge?) support is now in the 1374 area. As with SPX a strong short term support trendline has formed, but on ES it has now broken since I capped this chart:
EURUSD has been making steady progress towards the double-top target in the 1.222 area, and rising (wedge?) support is now there too. I'm slightly concerned short term about the marginal lower low on positive RSI divergence and we might see some reversal here:
I've been looking again at the CL chart and on reflection the double-top that I was talking about yesterday is actually an H&S. The effect is much the same but the target changes to 91.45. CL has broken both the neckline and 93 support overnight:
The really interesting charts this morning however are on TLT. I mentioned the possible downsloping H&S there a couple of days ago and that 60min chart now looks alarmingly bearish, with the neckline broken on that H&S and retesting at the moment. The bounce so far is from a test of the strong support area at 23.5 to 24 that I mentioned and a break below triggers a bigger picture double-top target in the 116.5 to 117 area:
However that is not the full picture. Looking at the 15min chart a very nicely formed falling wedge has formed from the early August high on TLT, and that broke up after the major support hit yesterday on positive RSI divergence. This is a very nice bull setup and should at least take TLT up into gap resistance in the 126.4 area I think. The full falling wedge target is 130.69, but while these patterns are good reversal signals, they are not high probability patterns for making target:
Overall, and for the third day running, I'm leaning short. I'll be watching that triangle on SPX, the 1390 level on ES and the falling wedge on TLT. If we see a retracement into the 1375-80 SPX area then I'll be looking for reversal back up there. A break much below that area would suggest that a significant high may have been made, and that would be backed up by the TLT test of major support ...... as long as TLT holds that support.

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