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Friday 28 June 2013

Testing Serious Resistance

I posted a SPX 5min chart on twitter yesterday shortly after the high pointing out the negative RSI divergence there, and that the high was an almost exact test of the daily middle bollinger band. I won't use that today but you can see that chart here. On the SPX daily chart we can see that the high yesterday was a test of the daily middle bollinger band, the 50 DMA, and an approximate test of broken broadening wedge support. This is obviously a very significant confluence of resistance levels and the most obvious place to see either a retracement within a new uptrend, or possibly a rally high within a continuing downtrend. On a clear break above this area the obvious target is the daily upper bollinger band, now in the 1662 area. SPX daily chart:
On the SPX 60min chart you can see that this is a fairly close test of broken broadening wedge support, and if we see a 60min close back above this trendline I will be treating that as a strong signal that the main retracement low is now behind us. That said the next level of resistance above would be declining resistance in the 1642 area. SPX 60min chart:
Looking at the current reversal setup on the ES 60min chart, there is now a clear possible double-top in place with a target in the 1596.50 area on a clear break below 1605.50. This nice looking short term reversal setup is supported by the first high at serious SPX resistance yesterday, clear negative divergence on the ES 60min RSI, on the SPX 15min RSI, the 61.8% fib retrace of the plunge from 1654 SPX, and a rising wedge breaking down on the SPX 15min chart (not shown today). 50 hour MA support is now in the 1602.50 area. ES 60min chart:
I've some more time to look at other markets today, so CL broke over 96.2 resistance as expected yesterday and the next obvious target there is in the 100 area. CL 60min chart:
USD is assumed bullish until demonstrated otherwise but while we're waiting to see whether USD can break the current highs with confidence I'll look at GBPUSD, one of the stronger performers against USD in recent weeks (AUDUSD and CADUSD particularly both looking much weaker). I am assuming an overall downtrend on GBPUSD and that has now completed what looks like an ABC retracement into the 61.8% fib retracement of the decline from the turn of the year high. If I'm right about the overall downtrend then we should soon see the May then March lows taken out as GBPUSD moves towards the 1.40 support area. I've mainly watching the 60min chart for signs that GBPUSD might reverse back up and there's nothing to suggest a reversal is near on that chart yet. GBPUSD 60min chart:
I'm also watching the 60min TLT chart for signs of reversal near the major 105/6 support level, and I'm seeing some positive RSI divergence at the last low. It's worth adding though that the current declining channel from 123.98 has not yet broken up and that even when it does, that five of the last six significant reversals reversed with a strong bottoming pattern that cannot yet be seen on TLT. If TLT is bottoming out we might well therefore see new lows for a closer test of the 105/6 level. TLT 60min chart:
The last chart of the day is AAPL, and the question there is whether the possible double-bottom setup there will deliver. In support there is the broken falling wedge, the positive daily RSI divergence at the current main low, and that low being an almost perfect 50% fib retracement of the 805% (wow!) move up from early 2009. I really like this reversal setup on AAPL, which also looks cheap compared to the market as a whole. If we see the current low broken with confidence however my next target would be at significant established support in the 305-15 area, with the 61.8% fib retracement at 312. AAPL daily chart:
No time for a gold chart today, though I'm planning to post a chart on Monday talking about the important of the 1160 area target and the reasons why we could very well see a major trend reversal there.

I like the odds for a retracement on ES and SPX today, and as I mentioned, that might turn out to be a rally high before new lows, though I'm doubtful about that at the moment. If we see SPX bulldoze through resistance here (and close today above it) without a retracement that would go a long way to confirming that the main retracement low is behind us, and would also open up the next main target at the SPX daily upper bollinger band, now in the 1662 area.

I have mentioned a few times that the upside target on the rising wedge that broke up earlier this year is the 1965 SPX area, but haven't talked much more about that as yet. I will be doing a weekend post going up tonight or tomorrow that will be looking at that target in more detail and explaining why I am treating it as a serious target that may well be reached.

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