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Thursday, 15 August 2013

Resolving Downwards

SPX closed well below the middle bollinger band yesterday and ES has fallen further overnight. The SPX daily lower bollinger band is in the 1679 area, and that is some support, though it isn't as strong as the resistance found at the upper band during uptrends. SPX daily chart:
Having now got this far I'm expecting a move back into the low 1640s on SPX and high 1630s on ES. There are however still two main topping options. On SPX the key level is at 1676 and the question is whether we see a bounce there to form the right shoulder for an H&S, or whether SPX drops straight through it to trigger a double or M top. Either way the target is in the 1643 area. SPX daily chart:
There are some mornings when the market picture shifts dramatically while I'm writing, and this is one of those mornings. I have declining channel support on ES at 1669.50 at the moment and if we saw ES move under 1672 then that was going to be the primary support I would be watching today to see whether ES was taking the H&S or double-top option. ES just dropped well below it and if we see an hourly close below channel support I'll be assuming that we are looking at the double-top option. ES 60min:
Bonds are moving fast as well this morning. After breaking up from a very tight declining channel ZB formed a bear flag and then broke down overnight. I was watching the 131'25 area carefully to see whether ZB was going to make a lower low and it has done so since I capped the chart below. This reconfirms the downtrend and unless there is a strong rally into the open, the strong support level and possible H&S neckline on TLT at 105 will most likely be broken. On that break on TLT my target there becomes 99. ZB 60min chart:
On other markets GBPUSD has made a higher high within the rising wedge. This looks very shortable within the overall rising wedge and GBPUSD has dropped back hard since I capped this chart. The primary target is still wedge support and that is now in the 1.526 area. GBPUSD 60min chart:
CL has established a shallower support trendline and the next obvious target is the last high in the 108.80 area. Until CL gets back over that it is still making lower highs and lows. CL 60min chart:
GC moved up yesterday and made a marginal new high, giving two possible double-tops on the GC chart. Since I capped this chart GC has broken down to test double-top support on the smaller one. If that breaks down I have the target in the 1284 area. The trigger level for the larger double-top is in the 1272 area and the target for that double-top is in the 1195-1200 area. GC 60min chart:
I am now expecting to see a move towards 1643 SPX soon. We might still see a right shoulder form first on the H&S scenario but we would need to see a significant recovery into the open as the new hourly candle on ES just opened below broken channel support. As it is we might just gap and go today and if so the next decent support on SPX is the 50 DMA in the 1655 area.

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