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Thursday, 25 April 2013

ES Breaks Back Over 1580

There are a lot of nice looking H&S patterns forming across the US equity indices, including on SPX, but one thing that has made me doubtful about the H&S on SPX particularly continuing to form is the confident break above the daily middle bollinger band on Tuesday. Usually, though not always, a break like this will deliver a test of the upper bollinger band if there is not a major moving average (50, 100 or 200 DMA) on the way, which in this case there isn't. That upper bollinger band is now at 1593.50, and I'd generally count anything within six points or so of that as a hit, so we may well see that target area made today. Here's how that looks on the SPX daily chart:
ES has broken back over 1580 overnight so the negative RSI divergence on the 60min chart should now be disregarded. The falling wedge target is a retest of the highs and that's what I'm expecting to see now:
How will this affect the H&S patterns forming on SPX, Dow, TRAN and RUT? Well obviously it would kill the H&S on SPX, leaving the remaining topping pattern option as the second high of a double-top:
On Dow the obvious failure level is right here from a trendline perspective, but we could see SPX test the highs without killing the H&S pattern as Dow has been underperforming SPX in recent days:
TRAN like Dow could go higher without killing the H&S, though as with Dow a strong push would put us in double-top territory:
RUT is the most bullish looking chart for me, as though a nice looking H&S is forming there as well, we also have a tentative rising channel from November established at last week's low. RUT is in a significant resistance area here:
I'm not going to post a EURUSD chart today as there's little to say really. This is a significant inflection point and I'm waiting for a decent break either way. I'm leaning somewhat short until we see a break up. On CL we needed a similar break and got it yesterday with a strong move up that broke declining resistance from the last high. The upside target is in the 92.7 area:
Are these reversal patterns for a spring high going to deliver? I think so. An opportunity to top out came and went yesterday but there are decent odds that SPX will fail at the retest. At the least as a short entry the daily upper bollinger band has appeal and after three clear breaks above the daily upper bollinger band since November without a strong retracement a fourth would be less usual. There are many that say that there can be no substantial retracements while QE is ongoing and we are about to see that put to the test.


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