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Tuesday, 19 November 2013

Hitting Inflection Points on SPX and Oil

SPX reversed hard after breaking 1800 yesterday and it seems that high may have already hit the trendlines I was looking at as strong resistance in the 1805-15 range. SPX could go a little higher within those trendlines, but not much. 

The first resistance trendline hit yesterday was broken megaphone support from the November 2012 low. This has been firm resistance since August and was hit at the high yesterday. There is a bit of play in the trendline but no more than another three or four points. SPX daily chart:
The second trendline hit was possible channel resistance from the October 2011 low. I have an alternate slightly higher but the best fit trendline has now been tested. Again a bit of play in the trendline so SPX could go a bit higher. SPX daily chart from Oct 2011 low:
The third trendline hit is on the current rising wedge on the 60min chart. SPX didn't hit the wedge resistance trendline I showed yesterday but I found a lower alternate last night that was overthrown at the high. That is a decent alternate possibility and if that's right then we should see wedge support in the 1778-80 area broken before any possible retest of the high. SPX 60min chart:
What is RUT telling us here? There was a clear rising wedge breakdown yesterday afternoon and I am no longer looking for the IHS target in the 1126/7 target to be made. There is now a possible large double-top in place on RUT and as I have mentioned a couple of times, there is a real possibility that the next retracement could be a big one. RUT 60min chart
I've been looking for a test of rising channel support on CL (and WTIC) and that has now been hit with positive RSI divergence on the daily chart. This is a setup that I would expect to deliver at least a decent bounce and very possibly a main trend reversal. Oil is a long here as long as that channel support holds. WTIC daily chart:
You'll notice from the chart above that the current rising channel is within a much larger triangle. If rising channel support breaks then the next target would be triangle support in the 80 area. If that were to happen I am running a VERY bearish possible scenario that would see oil fall back into the 40s. I'll illustrate that scenario with a very nice example of a symmetrical triangle on the SPX 1min chart that delivered a false break up yesterday afternoon before resolving downwards as you can see below. Triangles do that a lot which makes them tricky to trade. SPX 1min chart:
With that example in mind, consider the WTIC weekly chart with that huge triangle which has so far followed a similar path to that SPX triangle. I'm not saying that WTIC will do the same, but the pattern setup is very similar, and that is why I have mentioned this possibility regularly in recent months. WTIC weekly chart:
The bears delivered a decent afternoon yesterday, but need to follow through today to firm up any reversal here. the key support levels I am watching on SPX are rising wedge support in the 1778-80 area and broken resistance at 1774/5 SPX. 

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