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Friday 7 June 2013

Buffing Fingernails Modestly

I gave main support yesterday in the 1595-7 range, which was a little low as the target trendline was hit at 1598.23, though I posted on twitter shortly afterwards that the wedge support trendline had been hit.  After that SPX bounced strongly and closed back well above the daily lower bollinger band. The next obvious target on the daily chart is the daily middle bollinger band, now in the 1646 area. SPX daily chart:
Looking at the SPX 60min chart the low was a perfect hit of wedge support, which is the rising support trendline from the November low. The next target within the wedge is the wedge resistance trendline, now over 1700, but it may well be that the wedge will break down without reaching that target. SPX 60min chart:
So how does the setup look for at least a strong bounce here? Pretty good in my view. Looking at the other indices RUT bounced just after breaking the double-top trigger level, and as I've mentioned before, when these patterns fail that's where they tend to fail. Dow almost made the double-top target, and was close enough, and the same for the H&S on TRAN. I'll show the 15min chart on TRAN today as there is a clear declining channel there and a perfectly formed double-bottom just waiting to break up. TRAN 15min chart:
I posted the SPX 5min chart below on twitter yesterday shortly before the low. That was before the final spike down to make the low but I was showing the falling wedge that has formed there and the obvious next move to test wedge resistance in the 1635-40 area. SPX 5min chart (yesterday intraday):
Here's how that chart looked at the close yesterday, with a couple of changes to the minor trendlines. What difference did the final spike to the low make? It delivered an overthrow of the wedge, and that is a strong indication that this (70% bullish) falling wedge may well now break up. These wedges aren't great at making target but the technical target would be back at the highs of course. SPX 5min chart:
The setup also looks pretty solid on the ES 60min chart, where there was a clear W bottom that broke up and retested, with positive RSI divergence at the low. I have the target in the 1630-40 range depending on how the target is calculated. ES is back over the 50 hour MA and the overnight action looks like a bull flag. ES 60min chart:
Oil rose a bit further yesterday but I won't show the chart as there's not much to see. USD however was very interesting yesterday, as it broke rising support from February, tested the 200 DMA intraday, and may have established the lower trendline of a rising wedge turned rising channel. USD closed back above very important 81.5 area support and if yesterday was the low then the overall bullish setup is still intact. Any lower and the overall USD uptrend is in increasingly serious doubt. We'll see how that goes and the lower support levels are on the chart. USD daily chart:
The big news today is jobs and I see that is out and the ES bull flag has broken up. The key resistance level today is SPX declining resistance from the high in the 1635-40 range. A break above should deliver further upside and I'll be looking at a possible IHS neckline in the 1645 ES area.

I've been promising a weekend post on secular cycles for a couple of weeks now and I plan to post that tomorrow. I don't recall ever reading one of these written from a trendline and pattern perspective so it should be an interesting read. Everyone have a great weekend. :-)

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