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Thursday, 9 May 2013

Impulsive Move Confirmed

One thing I was looking for this week was follow-through on SPX to confirm the very bullish break over strong trendline resistance last Friday. Obviously we have been watching that follow-through and confirmation, and this means that we are definitely watching another impulsive move up. Last month's topping process was just consolidation and the next topping process opportunity will begin when SPX breaks rising trendline support from the November low. There is no strong reason to think that will happen soon.

SPX closed at the upper bollinger band for the fourth straight day yesterday and is likely to start falling away from the upper band soon. I've put the usual SPX daily chart over the last year to clearly show previous instances where we have seen this, and unless we are to see SPX break over the upper bollinger band, the length of moves like this tends to be in the 4-5 days area. Yesterday was day four and the target area on SPX if we are to see this for a fifth day is 1638-42:
Yesterday I was seeing channel resistance in the 1635 area. Looking more closely it is actually slightly above 1640, so I am favoring another push up today below the daily upper bollinger band to hit this target. Rising channel support from November is now in the 1565 area:
In a strongly trending move like this one ES tends to hold above the 50 hour MA, and that is now in the 1622.75 area. Any sustained move below this would be a short term warning signal for today. Rising support for the current move on ES is now at 1604:
Sometimes EURUSD is pulled in conflicting directions and just stalls. In recent months this has tended to happen when an overall bullish trend is fighting with the fact that EURUSD is increasingly unappealing even by the low standards of developed world currencies nowadays. When this happens I often find it helps to look at GBPUSD, and the current bullish trend is easy to see from the perfect rising channel there. The next obvious move on GBPUSD here is a retracement into rising channel support in the 1.535 to 1.54 area:
Direction on CL is uncertain. As I mentioned earlier this week it has now reached the right area to reverse if the lower highs and lows of the last few months are to continue. In the short term we may now have a lower high and I would see a short term lower low below 94.85 as bearish. Rising support for the current trend is now at 92.5:
I've been watching the AAPL chart to see whether my theoretical declining channel resistance there would break, and it has which is cautiously bullish. There is a lot of 60min negative RSI divergence here and we may well see a strong retracement here. Given what's happening in the rest of the market it would be hard not to see that as a strong buying opportunity on AAPL, which is looking relatively pretty cheap here:
As we are now back to normal bull programming I have been watching for a decisive break lower on TLT. We haven't seen that yet but it should be coming. I posted a chart in late March with a sketched path for where I think TLT is going over the next year and I've updated that chart without changing the comments. If I'm right about this setup then I'm expecting a 10%+ drop in TLT over the next few weeks to complete the head on a large H&S pattern. It's worth bearing in mind here though that the falling wedge target was a retest of the 2012 highs and that setup is still unbroken, though that scenario made most sense within the context of a sharp correction on equities that was happening now, and that obviously isn't happening or expected soon:
I would like to see a fifth day on SPX of pushing up under the upper bollinger band to hit channel resistance on the 60min chart. If we are to see that then I'd expect the 50 HMA on ES to hold on an hourly close basis and if we see a close below there that would be a warning signal.

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