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Tuesday, 4 September 2012

Pointing South

It's rare for me to be working through my charts in the morning and to see everything pointing in the same direction. That's what I'm seeing this morning though and I'm leaning correspondingly bearish today.

On SPX resistance was found at the middle bollinger band on the daily chart on Friday. That is cautiously bearish:
On ES the short term pattern is now a clear descending triangle. The last one of these broke up but these break down 64% of the time. On a downward break the target is in the 1374 area with a 54% chance of making that. It's worth noting that main rising channel support is at 1374 today. Triangle resistance is in the 1310.50 area and on a lower probability upward break the target would be at 1432.50 with an 84% chance of making target:
On TLT I gave the three highest probability paths on Friday morning and TLT went with option 1, which was a break upwards, a fill of the next gap up, and an IHS target at new highs. TLT is looking overbought right now, but this break is looking distinctly bearish for equities:
On CL I was talking about the possibility of a double-top after the break below rising wedge support last week, and we now have a candidate double-top with negative divergence on the 60min RSI. This looks weak and in the event that this double-top triggers on a break below 93.9, the double-top target is in the 89.5 area:
I posted my 5 year DX chart on twitter on Friday and used it in my weekend post as well. You can see that here. DX is obviously hitting major support and regardless of whether we are seeing a major trend change on USD a bounce looks likely here. On the 60min chart DX has formed a falling wedge and is showing sharp positive divergence on RSI. Falling wedge resistance is currently at 81.95, on a break over that there is a W bottom target at 82.75:
There's no negative divergence on the EURUSD 60min RSI, but it's very clear on DX and GBPUSD so I'm expecting a decline. There are two possible double-tops on EURUSD at the moment, the first triggers on a break below 1.255 with a target in the 1.249 area. The second triggers on a break below 1.2465 with a target in the 1.23 area. Rising wedge support is currently at 1.243:
Altogether TLT, DX and CL are all pointing in one direction, which is down for equities. That should be respected. Unless we a conviction break over 1310.50 ES I'd sell any rips today. The break on TLT and the reversals on DX and CL may well be major reversals. If so then that may well put equities under pressure for a while.

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