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Friday 20 September 2013

Friday Triple Witching

First today a great quote taken from one of my morning pre-market destinations at the Stock Market Almanac Blog, where they warn that the stats lean bearish today:

We go to the movies to be entertained, not to see rape, ransacking, pillage and looting. We can get all of that from the stock market. - Kennedy Gammage of The Richland Report

I'm leaning bearish with them today and would point out first that with the close yesterday at 1722.3, and with the weekly upper bollinger band on SPX at 1725.5, there is little room for upside today unless we are going to see a weekly close punch above the band, something which is both rare and usually a sign of an imminent top. Most of the available trading room today is below. SPX weekly chart:
Is there a chance that we may see a significant top here? Yes though I don't think it is in yet if so. I mentioned yesterday that the post FOMC high on Wednesday was a perfect retest broken megaphone support from last November and as long as that area hold we may still be in a (double) topping process for that pattern. I would see any move below the 1709.67 high as a warning signal that a top might be in. Until that time I'm expecting at minimum a marginal new high. SPX daily chart:
On ES that strong support level is at 1704, and is strengthened by also being the weekly R2 pivot. I have ES in a rough rising channel from the lows and the next obvious target is channel support, currently at 1706. I'm therefore seeing the 1704-7 as an ideal low range today. ES 60min chart:
Not much to see on the CL chart today so I'll just mention that CL reversed strongly yesterday from 109, failing to make a higher high over 109.17, but hasn't yet broken the last low at 104.95 either. The next natural target is under there to confirm that the current cycle of lower lows and highs is unbroken.

The USD low yesterday was at 80. 80 is a significant support area in its own right, so the spread from 80, through channel support 79.3 to 79.5, to the possible double-top trigger level at 78.6 is the key support area for an ongoing bull market in USD. When double-tops fail they generally fail just after the trigger level breaks, so I would broaden that area slightly to 78.5 to 80. A break below would put USD firmly back into bear market territory. USD daily chart:
ZB is pulling back from the double-bottom trigger level and has a clear declining resistance trendline. I have a couple of possible trendline targets that I have marked on the chart and will be watching ZB carefully for signs of the next low. If I don't catch that I'll go long on a break above the short term declining resistance trendline looking for a rally to 136. ZB 60min chart:
The last chart of the day is SLV, where I am watching with great interest to see whether silver can break over current falling megaphone resistance. If it can then the possible IHS targeting the 30 area is in play and the bear market on precious metals may well be over. Either way a break up from the megaphone should yield some impressive opportunities on the long side in SLV and in the related setups on gold and GDX. SLV 60min chart:
I would be very surprised to see a close over 1730 today, as that would be the second punch over the weekly upper bollinger band this year. The last one was the week before the May high and I only have eight of these in the last fifteen years. If we see that it would be strong warning signal that a significant top should be close. Ideally for me the day should be dominated by a retracement into 1704-7 on ES (1710-3 SPX) followed by a bounce which shouldn't close higher than 1727 SPX.

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