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Monday 23 September 2013


ES hit my targets on Friday but didn't reverse there, closing very well below both the daily and weekly upper bollinger bands. I was asked why I am expecting at least a test of the highs before a larger reversal and the main reason is that there was no NYMO or daily RSI 5 divergence at the current high. We don't always get either of course, but we do much more often than not, as you can see from the 7 month chart below showing the trend reversals over that period. SPX vs NYMO daily chart:
Having said that the post FOMC high was at a bearish scenario target I had previously given at the retest of broken rising megaphone support. There is a very significant danger that the second high of a significant double-top has already been made, so while I'm still leaning towards seeing at least a retest of the highs from here, that should be borne in mind. Obvious support on the daily chart is at the 50 DMA in the 1679 area and the 20 DMA (the middle bollinger band) in the 1672 area. SPX daily chart:
On the SPX 60min chart you can see that the support trendline I was expecting to hold on Friday was broken, and there are three unfilled gaps below. I wouldn't be at all surprised to see the first gap filled today, filling the second would raise a serious question in my mind about the chances of a new high here in the near future, and if the third is filled that would be at a test of the middle bollinger band. If we see a close much below the daily middle BB that would be very bearish. SPX 60min chart:
I mentioned the possibility that an IHS was forming on AAPL over the weekend this morning, and AAPL almost reached the ideal right shoulder low on Friday. This ship seems to have cast off already with AAPL as high as 490 in the premarket. The IHS target is in the 505 - 510 area and there is still an open higher degree double-bottom target in the 540 area of course. AAPL 60min chart:
CL made a lower low since Friday morning and that has reconfirmed the current sequence of lower highs and lows since the 112 high. I'd expect a bounce sometime soon but there's no RSI divergence as yet. CL 60min chart:
I have written extensively about a likely rally on bonds over the last couple of months, without much actually happening so far apart from the decline on bonds slowing and then stalling altogether. On TNX I have yields topping out but the topping pattern could either be a double-top or an H&S forming. If it is an H&S then there is one last spike up coming soon with a target in the 29.2 area before a decline into the 24 area. If the pattern is a a double top the target would be the same and that decline should start shortly. TNX 60min chart:
The Stock trader's Almanac blog has this week as bearish historically, with Dow down 18 of the last 23. My friend Alphahorn posted a publicly viewable post over the weekend looking at where the market is now and the short term options ahead. If you're interested in the take of a guy who has a model portfolio up 55% in 2013 so far then I suggest that you take a look at that here. I have mixed feelings about direction today after the support breaks on Friday. I think that the gap will probably fill, but am leaning towards at least some more downside after that.

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