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Friday, 3 May 2013

Still Testing Resistance

Another marginal higher high on SPX yesterday, though that was a marginally lower high on ES. On the ES chart that was a retest of broken rising support for the last move and the overnight action looks like a bull flag, though it's worth noting that at this point yesterday the overnight action looked like a bear flag. Support on ES this morning is in the 1586/7 area at the hourly 50 and 100 MAs:
The resistance trendline being tested at the moment is the rising resistance trendline from the 2000 high through the 2007 high. That is a major resistance level and and obvious level to reverse from, though unless we see something really unexpected in the next few months I'm expecting this trendline to break at some point this year:
Looking on the weekly chart at the current cyclical bull market since October 2011 the first high of the current possibly double or M top on SPX was clearly at rising wedge resistance. That wedge resistance trendline is confirmed by also being the channel resistance trendline for the rising channel since the June 2012 low. With the upper chart the April high was clearly then at the intersection of three major resistance trendlines. Is it possible that we could see the break over 1600 that so many expect within this rising wedge/channel scenario? Yes, as the trendline has risen since the April high. Another test of this resistance trendline would now be in the 1605/10 area. A move to test that would break over rising resistance from 2000, but would still be within the pattern setup for the current cyclical bull market:
Looking at the same period on the daily chart, the upper bollinger band closed yesterday at 1608, so a move to test the 1605-10 area would also be within the SPX daily bollinger bands. That doesn't mean we're going to see that move, there's strong resistance right here, but it would fit within the current cyclical bull market trendlines:
EURUSD made a short term high and low in the last two days and that's given me more to work with from a trendline perspective. There is now a possible rising wedge forming on EURUSD from the April low:
I mentioned yesterday morning that the CL break below support might well be to establish a shallower rising support trendline. In fact a rising channel was established at the lows which supports more upside as long as CL can break the current highs. If we see a strong reversal at that test which then breaks the rising channel I would be looking for a retest of the April lows:
I have too many charts to show today so here are the links to my current take on the 60min charts for Dow, TRAN, RUT and COMPQ.

I am strongly expecting to see a significant high made very shortly, either in the current high area or in the 1605-10 area if we see that widely expected break through 1600. As with any market forecast it may not deliver, but the odds are still stacked in favor of seeing a significant high near here and soon in my view. As I have been writing ES has broken up to the 1600 level, if that holds into the open then it is that 1605-10 SPX level that I will be watching. If it doesn't hold into the open then there will still be strong resistance under 1600 on the SPX chart.


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