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Thursday, 3 January 2013

Approaching Resistance

I generally make a rule of posting no more than eight charts in a single post but I have nine today. Apologies to anyone who thinks that is too many but they're all worth including IMO. I've taken out three others including the Dow chart showing a second retest of the broken rising wedge support trendline close above yesterday's high.

SPX punched up strongly through the upper daily bollinger band yesterday. This is a relatively rare occurrence and I've marked six previous instances of this on the chart below. Of those six, only the last one marked a short term high, and for this and other reasons I'll explain below I'm expecting at least some more upside before we get a significant retracement:
On the weekly SPX chart the target is the weekly upper bollinger band. Nine of the last eleven strong breaks above the weekly middle bollinger band have made it to the upper bollinger band, now at 1476. I would count a hit generally as being within 5 points, and the 2012 high is at 1474.51, so obviously we are looking for a test of the 2012 high on this move:
On the SPX 60min chart rising channel resistance has almost been reached. There is a little leeway on this but the resistance trendline is in the 1465-70 area at the moment. There is also a possibility that a broadening formation is forming, with the support trendline at 1398. This is worth bearing in mind as these break down 66% of the time but I'm not expecting that here. My channel resistance trendline may break, but if it holds then we cannot see a test of the 2012 high for another week or so. We'll see what happens if that trendline is tested today:
I showed the two double-bottom setups on AAPL yesterday and the smaller one has duly broken up. The target is 568 and I'm expecting that to be hit:
On other markets CL has retraced slightly from yesterday morning. I have strong level support and rising support in the 90 area with some support on the way in the 91.5 area. My target is the strong resistance area at 94.8. Unless we see a break below 90 this is a buy on pullbacks setup:
I mentioned the possible double-top on EURUSD yesterday morning, and somewhat to my surprise it broke down overnight. The target is the strong support level at 1.30. On the strength of this DX has broken back over 80, which is a surprising show of USD strength. I'm not convinced that this double-top will make target but I'm watching with great interest as this is a significant divergence from the doomed USD dollar / equities to the moon meme that I've been reading a lot this week. I'm still viewing USD as being in an overall downtrend, but that hasn't yet been confirmed with a break below the September low of course. If DX can break over declining resistance in the 80.55 area that overall downtrend will be in some doubt:
GLD is bouncing within the declining channel that I have shown a couple of times before. There are two obvious points of failure for this move, and the first was reached at short term declining resistance yesterday. Channel resistance is higher just under 167 and a break over that would look bullish:
I've mentioned a few times before that I'm not a big fan of Vix Buy and Sell signals, but the last three confirmed Vix Buy (equities) Signals were good performers and another was confirmed yesterday. As you would expect when there has been a big decline on Vix, these signals are often followed shortly afterwards by some retracement on equities before the next move higher:
I've saved the most thought-provoking chart today for last, and that is the seven year chart for the Transports index. I've been posting the TRAN chart regularly over the last year or so as there has been a large Dow Theory non-confirmation as TRAN has failed to confirm new highs on Dow since 2011. I posted this a few weeks ago saying that TRAN needed to first take out the 2012 high, which we saw happen yesterday, and then the 2011 high at 5627.65. That 2011 high is within striking distance now and if it is taken out then this longstanding Dow Theory bearish non-confirmation will disappear. Overall the TRAN chart looks bullish as long as TRAN can hold the 5000 area:
So what of today? I'd like to see channel resistance on the SPX 60min chart hit but I have some doubts about seeing that today as both the SPX and ES 60min RSIs were showing some negative divergence at the close yesterday. Immediate support on ES is in the 1452.50 area with stronger support in the 1445.50 area. On a clear break below 1445.50 ES we might see an attempt to fill yesterday's opening gap down to 1424 and that would be a decent fit with a retracement to the daily middle bollinger band on SPX, now at 1425 and rising quickly. If we see a strong retracement I would see that as a buying opportunity as I'm expecting to see a test of the 2012 high on SPX in the next few days. Overall however the odds favor seeing at least some more upside before any attempt to fill yesterday's opening gaps on SPX and ES.

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