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Monday, 8 October 2012

Possible Double Top on SPX

As I was suggesting it might, SPX tested the highs and the upper daily bollinger band on Friday and reversed there. That leaves a possible short term double-top in place on SPX which would trigger a target in the 1385-90 area on a break below the late September low at 1430. I'm not actually expecting that to happen, 65% of double-tops never make it back to the valley low, but it's something to bear in mind. Until that happens though there is very big support around there at SPX rising channel support, the lower bollinger band and the 50 DMA and that would be hard to break below:
So how far might this retracement from Friday's high go? Unless we see a clear break below 1430 downside  looks limited but I posted a chart on twitter just as I was leaving for the weekend showing what I think we might see here. This chart was posted an hour or two after the high on Friday:
So how's that looking now? Well the short term rising channel broke by the end of the day and ES has retraced to test the 1450 area overnight. There is some decent support there and at the 1444.50 ES / 1450 SPX level slightly below. If we see a break below there today I have possible broadening wedge support in the 1434 ES area, and on a break below there we obviously might see a test of the late September lows:
EURUSD is looking weak. It made a nice (RSI confirmed) short term top on Friday and then broke below both the rising channel from 1.28 and the IHS neckline. This might still just be a neckline retest and if so I'd expect the rising support trendline in the 1.29 area to hold. If that breaks I would expect a test of the main rising support trendline from the 2012 low in the 1.275 to 1.29 area and I would write off the IHS:
I highlighted a possible declining channel on CL on Tuesday and said that I'd be happier about more upside on CL once that broke. Obviously it retraced hard from there but there is still very strong support on CL in the 87.5 area and I'm leaning long here (88.74 as I write) until that breaks. if it does break we might well see a full retracement of the move up from the late June low just under 79:
I haven't posted a gold chart in a few days and that's because nothing of much interest has been happening there from my perspective. I haven't changed the chart commentary below since I last posted this chart talking about a possible retracement from 1800 area resistance. That is now being tested, there is clear negative RSI divergence on the daily, and October is historically weak for gold.We will more than likely see a retracement on gold here and if so, I'll be following that carefully for the buy opportunity near the low on that retracement:
I'm leaning towards seeing more consolidation on equities here and am watching the strong support at 1444.5 ES / 1450 SPX to see whether SPX can break back below there. If it can then I'll be expecting more consolidation that may test the multiple support levels in the 1430-5 SPX area. That would be my preferred scenario here. I'm not expecting a break below the 1430 SPX level, but if we get that the double-top target would then be in the 1385-90 area, and the main target would be the very strong support level and possible H&S neckline in the 1396 SPX area.

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