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Thursday, 10 October 2013

Mind the Gap

There was a six point gap between my support trendlines on SPX and ES yesterday morning and it was the ES falling channel trendline that held the low. Since then ES has bounced as high as 1666.25 overnight, and I have main resistance this morning at falling channel resistance and the 200 hour MA in the 1670-2 area. Obvious support this morning is in the 1655-7 area. ES 60min chart:
The SPX falling channel I was looking at yesterday morning turned out to be a falling megaphone, which now has a decent three touch support trendline. I have megaphone resistance currently in the 1682 area, equivalent to the 1675.5 area on ES (though declining obviously) and that is my main upside target here, though we might see reversal at ES channel resistance. SPX 60min chart 1Mo:
There is also possible resistance at broken rising wedge support, and that is in the 1664/5 area, equivalent to 1657.5 - 1658.5 ES. ES has been trading over that much of the night and I'm not expecting that to hold as resistance today. We may see a breakaway gap over that at the open and if that is the case that gap should not fill until the upside target for this move has been reached. SPX 60min 6Mo chart:
SPX closed back at the daily lower bollinger band at the close yesterday, albeit a point below it. A break back above the band seems highly likely at the open in which case the upside targets are either the 50 DMA at 1678.34 and the daily middle BB at 1692. I'm favoring the 50 DMA retest for obvious reasons. SPX daily chart:
On other market large IHS patterns are close to completion on a number of bond instruments. Here is the one on TLT, which has a target in the 112.5 area on a clear break over 107. Support is at the 50 DMA in the 104.5 area. TLT daily chart:
GBPUSD may have just made a very significant high, but though negative RSI divergence is clear, and a double-top has broken down, I'm inclined to wait until rising support from 148.14 is broken before calling the reversal. That support is either rising wedge or rising megaphone support with two valid bearish patterns there. GBPUSD daily chart:
I'm going to use the setup on GDX as a proxy for silver and gold as well this morning as whichever way they go here, they will most likely go together. GDX may be putting in the second low of a double-bottom here and the weekly RSI divergence is encouraging for that bull scenario, which has a target in the 40.5 area on a clear break (gap must be filled) over 31.35. The trendline setup here favors the bear case however, which would see GDX break the current lows on the way to channel support and a test of the 2009 lows in the 14.5 to 15.5 area. This could very much go either way, though a break over falling channel resistance, currently in the 29 area, should confirm the bull scenario. GDX weekly chart:
Overall I'm not seeing much reason to think that a significant low has been made, with nothing to suggest that on RSI divergence or NYMO. This is a very news heavy market though and the last high was made on a news spike without the usual warning signals. If a deal is done over the budget and debt limit the same could happen with this low. If we see SPX break over 1685 I'll be assuming that the low is in for the moment, and considering the possibility that new highs might be made, though I would still regard any new high as part of an overall topping process. I'm very doubtful abut the monster opening gap being filled today, but if it is I'd be looking for yesterday's lows to be taken out soon afterwards.

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