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Monday, 3 June 2013

Break Then Retest

Mainly an equities post today as the action there on Friday was very interesting, and should follow through this week. On SPX the daily middle bollinger band was broken and I have marked the three main support levels to watch on the chart. They are the daily lower BB at 1612, the 50 DMA at 1600 and the primary target is of course the broadening ascending wedge trendline, now in the 1590 area. SPX daily chart:
On the SPX 60min chart the triangle broke down in the last hour on Friday and that's a confident break with a target in the 1590 area. A retest of the break today would be in the 1643-5 area and this is a sell the rips setup unless we see a break back over triangle resistance in the 1655 area. SPX 60min chart:
On ES the breakdown from the triangle on Friday was followed by a small double-bottom overnight which has broken up with a target in the 1643 area. Resistance is at broken triangle support in the 1642 area and the the 50 hour MA in the 1644.50 area. ES 60min chart:
I was talking about triangles last week and their tendency to often give a false break first before the real break in the opposite direction. Will that happen here? I think that's unlikely as this break down is well supported on other equity indices. There is a nicely formed double-top on Dow, and that broke down on Friday afternoon. The target is the 14820 area and there are rising support trendlines in the 15050 and 14500 areas. Once we see a break below 15000 I would be looking at the 14500 area trendline as the obvious target. INDU 60min:
A nice looking H&S formed on TRAN and that also broke down on Friday. The target is the 6085 area and it's worth noting that I have a possible sloping H&S neckline in the 6000 area. TRAN 60min:
RUT has the most interesting pattern setup here, and looks like the main chart to watch along with the SPX chart. There is a clear rising wedge from the November low and a broadening ascending wedge from the April low that again broke down on Friday afternoon. The obvious target is wedge support in the 940 area but there is an additional complication in that there is also a nice looking double top in play. On a break below 970, which we haven't seen yet, the double-top target is in the 932 area. I'm treating the primary targets on RUT as wedge support in the 940 area and on a break below that, theoretical rising channel support in the 915 area. RUT 60min:
I won't post any forex charts today but GBPUSD is close to my W bottom target at 1.53 now with an overnight high in the 1.5289 area. I'm treating that target as made now and am looking for a possible reversal back downwards from this area up to about 1.5325. There are no reversal signals as yet.

I will post the CL chart today as I have been having a careful look at that this morning. There is a clear double-top there and that is equally clearly breaking down, which fits with the overall intermediate term downward trend. There has not been a break downwards with any confidence so far however. Looking back on CL the last five reversals have been marked with reversal patterns that all made target after breaking their trigger levels, so there is every reason to be leaning short on CL here even though the break downwards looks very hesitant so far. CL 60min:
Overall I'm leaning strongly short on equities and hoping for a decent bounce back intro the 1640s on SPX/ES today to deliver a decent short entry for likely further declines.

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