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Friday, 5 July 2013

Carnage at the Bank of England

The Bank of England has a new Governor and his first act has tidied up my ambiguous forex charts nicely. Mark Carney was the Bank of Canada's Governor from February 2008 and was widely credited with Canada's seeming immunity from the 2008/9 financial crisis. Of course much or all of that credit should really go to his predecessor David Dodge who was in office from 2001-8, and avoided the mistakes made by the Fed and BOE over that time. Mark Carney can however take credit for much of what lies in store for Canada over the next few years, which currently looks a great deal less promising. Having been chosen by politicians though the man hired to sort out the BOE is not the man who actually delivered stability to Canada during the 2008/9 Financial Crisis, but just the man who took the credit for it.

Be that as it may Mark Carney has now committed BOE to a very doveish policy for some time to come, and GBPUSD's worryingly bullish setup from Tuesday morning has broken down with confidence, bolstering the overall bull case for USD and putting GBPUSD back on track towards the large triangle target in the 1.40 area. I was amused to see the usual rubbish about this policy shift being designed to boost bonds and lower interest rates, despite the clear evidence that QE does just the opposite. Needless to see after a small bounce UK Gilts are now well below where they were at the time of the announcement. GBPUSD 60min chart:
I posted an ES chart yesterday talking about a confluence of important resistance levels in the 1630-2 area and at the moment it seems that ES may have peaked before testing that, with clear negative 60min RSI divergence. We'll see whether this reversal lasts as that target area on ES is also roughly equivalent to declining resistance on the Dow, NDX, RUT and SPX charts, and so is a key area that we may well see tested soon. I have 50 hour MA support currently at 1612.75. ES 60min chart:
On the SPX daily chart Tuesday's close was the third day closing just under the daily middle bollinger band. If we see a break up from that today then I would expect to see next serious daily close resistance at either the 50 DMA at 1625 or the daily upper bollinger band in the 1657 area. SPX daily chart:
On the SPX 60min chart there is obviously a very good chance that we will see a gap over declining channel resistance, which would be bullish. The next key resistance area is the 1635-40 area with broken wedge support and declining resistance from the high. This is a decent fit with the declining resistance trendlines on all the major US indices except TRAN, and a break over this area would mean that the retracement low would then be very likely to be behind us. SPX 60min chart:
The exception to that is TRAN, where declining resistance has already been tested and a very nice looking (70% bullish) broadening descending wedge has formed. I would expect this to break up though a break above wedge resistance today could perhaps be an overthrow. TRAN 60min chart:
I won't show the CL chart today as I'm running short on time, but I will say that I have major multi-year resistance on CL in the 102.5 area and am watching that carefully. I will show the TLT 60min chart where TLT has now tested the declining channel resistance trendline I've been looking at over the last few days. It could break up here but I would normally expect to see a TLT reversal like this made with a clear reversal IHS or double-bottom and I can't see either yet. TLT 60min chart:
The last chart for today is the AAPL chart where the double-bottom scenario I was looking at the other day is looking good so far. One thing to add to the other bullish factors here is the clear Double Tap Reversal (DTR) Trendline that I introduced on Tuesday as a new reversal setup. As I said, I currently have this down as a strong reversal signal, though I'm still gathering samples. Just sayin' though. AAPL 60min chart:
While I've been writing ES has spiked up to exactly test the cross of declining resistance from the high and the possible triangle resistance trendline that I was looking at yesterday (buffs fingernails modestly). It is now pulling back sharply and on a break under 1620 I'd be looking for a test of the 50 hour MA.

Overall I must stress that the retracement low may well be in. I was looking at the possibility that this low might be made on the weekly middle bollinger band before this low was made and I posted the day after the low that the low might well already be in. That is still the case. The resistance levels on ES 1630-2 and SPX 1635-40 are the last hope for the bears in my view that SPX might reverse strongly to test the SPX 200 DMA after all, and that may well not happen. Ignore the news, there is little technical reason to think that this primary bull market is over, pundits are always pessimistic at lows and optimistic at highs.

I am posting intraday, closing and some other interesting charts on twitter these days and have added a feed of my twitter comments at my blog so that non-twitter users can see those there. Twitter users can follow me from there as well.

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