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Friday, 26 October 2012

W Bottoms Day 2

Obviously there was no bounce of substance yesterday despite the very promising setup in the morning. SPX closed up on the day however just above the lower bollinger band. If that continues today into a strong bounce then the obvious targets are the 50 DMA at 1435 and the middle bollinger band slightly higher:
SPX now has a very promising looking W bottom setup that targets 1437 on a break over 1422 and that fits with the 50 DMA target on the daily chart:
The W bottom on ES has deteriorated in quality over the last day but the declining support trendline is holding well and this still looks like bottoming action as long as that holds:
NDX has broken below 2660 support but has been crawling down the lower trendline of the declining channel there on positive RSI divergence. Unless that breaks this will continue to be a setup for a bounce into declining channel resistance, now in the 2730 area:
The strongly bearish setup on TRAN that I was looking at yesterday morning is reversing back up and there is a nicely formed short term W bottom there targeting the 5085 area on a break over 5040:
I'm not a big fan of Vix Buy (equities) Signals but I have to say that the last two confirmed signals both marked significant lows. For what that's worth Vix closed back inside the daily bollinger bands yesterday and a lower close today will deliver a confirmed Vix Buy Signal. If that is the case I would expect a move to at least 1430 based on other factors in any case:
As with yesterday the last chart for today is DX. I was saying yesterday that a conviction break over 80.35 would deliver a W bottom target at 82.1 and DX is testing that level now. This setup looks all the more promising because EURUSD broke below rising support from the 2012 low overnight. I think this might well play out:
From a technical perspective I'm looking for a bounce here. I'm thinking there may well be more downside afterwards but a bounce is overdue, and the GDP figure exceeding expectations at 2% this morning may well deliver it. Over a break over 1417 ES I'll be looking for a test of the resistance level in the 1430-2 area.

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