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Thursday, 3 October 2013

The Budget Deadlock Pattern

I don't know if it will continue today but the last two days have seen declines initially, followed by a dribble upwards all day on press conferences and vaguely optimistic statements that a budget deal might be close, then a decline overnight as it becomes clear than any agreement has been knocked back another day. This pattern may repeat again today of course.

On the SPX daily chart SPX is clearly trading around the middle bollinger band, currently at 1692. Support is at the 50 DMA, currently at 1680. Resistance is at the H&S neckline at 1697. If we break up from this range the obvious target is the upper BB, currently at 1727 but dropping fast. If SPX breaks down then the H&S target is at 1660, backed up by multiple support levels in the same area that now also includes the lower bollinger band. SPX daily chart:
On the SPX 60min chart The H&S neckline has been retested and there's not much to see unless SPX breaks back over the neckline or makes target. SPX 60min chart:
On ES I wanted to mention the weekly pivots today. i find these very useful and you can see that the low this week tested S2 (support level 2). Since that low support and resistance have, roughly speaking, been S1 and the pivot (in black). I would suggest that the low this week will most likely hold into the close tomorrow. ES 60min chart:
CL hasn't quite made the double bottom target I gave yesterday morning at 104.5. If it reverses at 104 I have a possible IHS scenario that could be very interesting and I've sketched that out on the chart below. CL 60min chart:
I was looking earlier this week at the possibility that a similar situation might be developing on ZB, with a possible IHS neckline in the 133'23 area there. ZB is looking very toppy there now and I have looked at the downside targets if ZB should now break down to form a right shoulder. ZB 4hr chart:
I have a possible reversal setup here on EURUSD that looks strong and could deliver a substantial retracement. A nice looking risk/reward play here. EURUSD 60min chart:
In the absence of a budget agreement today I'm expecting more chopping about within this range, and most likely a close within five points of the middle bollinger band. An agreement on the budget this week seems unlikely in the absence of any movement on either side.

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