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Tuesday, 30 April 2013

SPX Tests The High

We are reaching the end of the usual spring high window. May starts tomorrow and the last three spring highs on SPX were 2nd April in 2012 (failed retest end April), 2nd May in 2011, and 26th April in 2010 (slightly exceeded high ten days previously). SPX is now retesting the mid-April high and if it's going to turn, this is the place. If we see a sustained break over 1600 then SPX will most likely run quite a bit higher over the next few weeks but until we see that I'm leaning short with a target back at the 200 DMA on SPX:

SPX closed a few points below the upper bollinger band on the SPX daily chart yesterday, and the upper bollinger band closed at 1600. SPX is now in the right zone for a very high quality double-top if it reverses now. Middle bollinger band support is now at 1570:
On the SPX 60min chart the test of the current all time high yesterday was made on negative 60min RSI divergence. If we see reversal here then there is a smaller M top with a target in the 1558 area on a break below 1577.5:
There isn't any negative RS! divergence on the ES 60min chart, but rising channel support is in the 1584.5 area and the 50 hour MA is in the 1582 area. On a break below both today the chances of seeing a decent high here will look increasingly good:
Looking over other indices there is still a decent looking double top on NDX, and an H&S is still very much in play on RUT, though for symmetry the right shoulder really needs to turn down very soon:
On Dow the possible H&S is still in play though if we see Dow get any closer to the last high this would be better read as a double-top. Broken rising wedge support is still holding there:
On TRAN the H&S is still very much in play and TRAN has not broken back above broken rising channel support. One thing also worth noting here is that the move from the November low was led by RUT and TRAN, with NDX lagging badly, and that has reversed since mid-March:
CL continued upward yesterday and is showing marked negative RSI divergence on the 60min chart this morning. We may well see some retracement soon:
USD is at a potential inflection point here, and we have a possible change in trend in play there. I have strong support in the 81.8 area with secondary strong support in the 81.5 area. If we see DX break below these then the target is the 80 area and we could be seeing a change in the overall trend there:
Everything is now technically in place for a spring high here. The timing is perfect, we have support breaks and decent reversal patterns on all major US equity indices. Those patterns target the right sort of area for a decent retracement within an overall cyclical bull market, which on SPX is near the 200 DMA (now at 1460). Will we see that retracement now? Probably, and it's worth noting here that on SPX there has been at least a test of the 200 DMA (from above or below) every year since 1980 except 1989, and even in 1989 an attempted test made it most of the way there. For today an encouraging start would be a break below rising channel support on ES in the 1584.5 area and the 200 hour MA in the 1582.5 area.

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