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Wednesday, 3 October 2012

Waiting for a Break

Nothing much happened yesterday. SPX delivered an indecision doji on the daily chart that closed at the middle bollinger band for the third straight day, and TLT, TRAN and NDX all essentially traded sideways. There is quite a bit of potentially market-moving news today with the ADP Employment report at 8.30, the ISM Non-Manufacturing Index at 10, and an ECB meeting today. These ECB meetings have been pretty bullish lately, but with the Germans backpedaling in recent days on their earlier support for the ECB's statements that whatever was required to stabilize the Euro would be done, up to and including unlimited money printing by the ECB and direct support of stricken Euro members and their banks, the outcome of that meeting could well be bearish:
On the SPX 60min chart I now have rising channel support in the 1418-20 area, and at the close yesterday the 50 DMA and the lower bollinger band had met just over 1415. After the start of trading hours today I would expect both to be slightly higher so we should now get the intersection of key support levels just under 1420 that I was predicting early last week. That is the obvious level to see a retracement low here on SPX. We shall see whether that happens today.

On the shorter term trendlines there was a short lived break below rising support from the current low yesterday, but it was quickly recovered. I have declining resistance from the high in the 1454 SPX area today and a break above with any confidence should follow through for a test of the highs:
NDX just traded sideways yesterday but the potential H&S setup there is still very much in play:
TLT traded sideways to up yesterday and closed near the falling wedge resistance trendline. In the event of any significant move downwards on equities today the falling wedge would most likely break up. A higher high there would be over 124.97:
EURUSD hit and slightly exceeded my retracement target at the 200 DMA a couple of days ago. That was the bottom of the head on an unprepossessing  but valid potential complex IHS pattern. The neckline hits line up perfectly and the neckline is slightly downsloping. I've drawn in an idealized right shoulder completion and break up. Ideally the right shoulder wouldn't exceed yesterday's low by much. The ECB meeting today may cause a wild move in either direction of course so this may not be an easy pattern to trade:
A downside resolution is definitely a possibility though. GBPUSD pinocchioed below rising channel support from early August overnight and this often precedes a more confident break. EURUSD and GBPUSD will most likely reverse up or continue down together so this trendline on GBPUSD is well worth watching for a signal:
Lots of potentially market moving news today and the trading range on SPX is now down to 12 points. I have declining resistance from the high in the 1454 SPX area and short term rising support in the 1442 SPX area. A break with any confidence in either direction should follow through to the obvious targets at a test of the highs on an upside break, and the 1418-20 strong support area on a downside break.

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