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Friday 6 September 2013

Buy Bonds and Oil, Sell Euros

As well as my usual ES and SPX analysis I'm trying to get in the habit of also posting at least one chart from PMs, USD or USD currency pairs, bonds and oil every day unless there is really nothing of interest at all on one or more of those. With my daily post ration of charts set at a maximum of eight, that's workable on a normal day but in weeks like this it's a real struggle. I have eleven charts prepared today and will post the excess on twitter, and I think that's what I'll do from now on when I have this problem.

SPX tested the daily middle bollinger band yesterday. Slightly above is the 50 DMA, currently in the 1665 area which is a valid alternate target, but on a daily closing basis that needs to hold (within a few points) to avoid opening the path to test the upper bollinger band currently at 1701. I'm leaning strongly towards the current move being a counter-trend bounce, and if so, then this range between the daily middle bollinger band and the 50 DMA should be a powerful magnet for daily closes until this rally tops out. SPX daily chart:
On the SPX 60min declining resistance from the high closed yesterday in the 1667/8 area. The possible IHS neckline is at 1669.51 and that is a level I would like to see hold here, though a break above doesn't necessarily eliminate the ongoing downtrend scenario. SPX 60min chart:
ES retraced overnight to test the 50 hour MA and bounced there. That is an obvious strong support level and that's currently at 1651.50. I have ES in a (possible bull flag) falling channel from yesterday's high, and if we see a retracement below the 50 hour MA today I have trendline targets currently in the 1646.50 and 1641 areas. The 1641 channel support target is attractive because the weekly pivot is also at that level. After any retracement I am expecting another push to make the double-bottom target in the 1665 area. ES 60min chart:
These upside targets on ES and SPX are supported by the Dow and COMPQ targets but I have posted those on twitter along with a Platinum futures chart as I don't have room for them today. What I do have room for is the CL chart where the possible IHS forming that I was looking at yesterday is now complete and, since I capped the chart below, has broken up. The target is in the 113.50 area. CL has been making higher lows and highs and the last high was just over 112. I have also posted a few times the triangle that has broken up on oil with a target in the 145-50 area, which I've been thinking of as the Syria Intervention triangle. Just sayin'. CL 60min chart:
I was saying yesterday that I was disregarding the double-top on EURUSD unless the rising channel broke down, and yesterday that broke down. The double-top target is in the 1.295 area and I'm expecting that to be made. EURUSD 60min chart:
I think this break on EURUSD may well signal that another serious move up on USD is now in progress. If so I would expect GBPUSD, which hasn't broken down yet, to break down as well and I've put the levels and targets for the rising wedge and possible double-top on the chart. GBPUSD 60min chart:
I have been watching carefully over the last few weeks for signs of a counter-trend rally starting on bonds. Why is that? My reasoning is captured nicely on the TYX daily chart below, showing TYX at a key resistance level on heavy negative RSI divergence. This is a very promising setup for a rally on bonds, with the proviso that the next obvious upside targets on TYX haven't been reached yet and I would expect them to be reached after any bonds rally / yields retracement here. TYX daily chart:
Why is that important today? Well ZB has retraced all of the recent rally and has made a very marginal new long on positive 60min RSI divergence. This has setup up a very nice looking possible double-bottom target on ZB with a target in the 135'28 area on a break over the last high at 132'04. If bonds are going to rally, and they may not of course, this therefore looks like the place. I'm looking for that rally into the 136 area which would be a good area to look for long exits and short reloads on bonds, as I suspect strongly that the big decline in bonds over the last year has just been a warm-up for a big theme over the next few years. ZB 60min chart:
As I've been writing ES has taken out yesterday's high and if the figures in a few minutes are good, then we may see my 1665-70 SPX target area made today. I think this is just a rally so I will be looking for short entries there unless we see a definite break up. even on the bull scenario that the retracement low has been made, SPX would still have strong resistance and possible IHS neckline in the 1669/70 area.

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