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Thursday, 28 March 2013

ES Triangle Breaks Up

ES failed to make the top of the current channel on the last move up and formed a small triangle. That has now broken up and another test of the current high looks likely. If ES breaks above then channel resistance is now at 1566:
On the SPX 60min chart the possible double-top is still in play. If we see a move up to test the next big resistance level at the 2007 high at 1576, then this would be more likely to be an early stage H&S forming:
The daily upper bollinger band is also at 1576. Middle BB support is now at 1548:
CL bulldozed through negative RSI divergence yesterday and is close to testing 97. The current move up has the look of a bearish rising wedge however:
There's been a lot of talk about USD this week, and the prospects for a big USD rally over the summer. That could happen, as even though the Fed is printing hard, and this is obviously a form of devaluation, the components of the USD index are in the main looking even weaker. From a technical standpoint however I have concerns about this in the short term. The USD rally established a strong support trendline which broke a few days ago and was then recovered. The conservative double-bottom target is just over 84, and that is now in reach, but if that support trendline should break again a significant high may well then be in. I'm watching that carefully:
This USD rally only really got going when EURUSD peaked in early February. Until then the Yen and Sterling particularly were falling hard against USD, but as EURUSD is over 50% of the USD index, USD was still trading sideways. Yen and Sterling have been rallying weakly for some weeks now and EURUSD is showing signs that it may be close to some kind of low. CADUSD is 9% of the USD index and I marked in a possible rising channel support trendline sometime near the end of 2012 with some comments. Looking at that chart again this morning I see that CADUSD has bounced there, and so we may have a very significant low now made on CAD. My feeling is that we could see a significant high on USD made very shortly. Here is that CADUSD daily chart without any alterations made this morning:
ES has been dropping since I capped the chart at the top, but at the moment it is only retesting broken triangle resistance in the 1555.50 area. The 50 hour moving average is there as well. I'm leaning long but the RSI setup is ambiguous here, and if we see a break below the last low at 1551 I'd be inclined to interpret it as a sell signal with the obvious target in the 1545/6 area.

What would I like to see happen here? That's an easy one to answer. I would like 1538 SPX to be an H&S neckline, with the ideal top of the head in the 1575-80 range. Since the 2009 low significant highs have all been at big established resistance levels and that is now the last big level standing, and therefore the last chance to see such a high. The H&S target would obviously then be in the 1500 area. I was saying in the last weeks of December that the timing was wrong then for a big decline, which would normally begin in the range between the last week of March and the first week of May. We are now in that ideal topping range of course.

Everyone have a great Easter. My next post will be on Tuesday next week. :-)

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