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Thursday, 23 January 2014

A Case for 1775

I gave the ES range in two parts yesterday morning, 1826 to 1835, and 1835 to 1844. The RTH low yesterday was 1835 dead and the overnight high was 1844 dead. Clearly ES has not yet broken out of the range. There was a sharp decline on the Chinese PMI numbers and ES broke down into the lower half of the range and then retested the 50 hour MA on a bounce. The opening advantage belongs to the bears this morning, and as long as we don't see a break back over the ES 50 hour MA, currently in the 1837 area, then we may well see a test of range support at 1826 today. ES 60min chart:
What if the range breaks down rather than up? I mentioned on 19th November after a rare punch up through the weekly upper bollinger band that historically there was a strong case for seeing a 4% retracement starting not too far above that punch. SPX was at 1800 at the time and if we were to see a 4% retracement from the current 1850 high that would target the 1776 area. I have decent trendline support and the weekly middle bollinger band in the 1775 SPX area, and on the 60min chart (not shown today) I have a possible double-top that would target the 1815 low on a break below the current range..On a break below the 1815 low the larger double-top target would be that 1780 target. SPX weekly chart:
Where is main support on SPX from here if we do see a sharp decline? Well the last low was at 1767.99, and rising support from the November 2012 low at 1343.35 is at now in the 1735-40 area. Daily lower bollinger band support is at 1824, but the tight pinch we are seeing on the daily BBs at the moment is signalling that a large move is coming. Obviously there is room for that move to be down. That wouldn't invalidate my 1965 wedge target either, though it would make to move towards it much more profitable to trade. SPX daily chart:
On other markets EURUSD has broken up from a falling wedge and while I'm thinking this is a counter-trend bounce I could be mistaken. I'm watching to see whether the last significant high at 1.37 is tested, and if it is, then I will have possible double-bottom and IHS options to look at there. EURUSD 60min chart:
I have CL in a possible rising channel from the last low and looking a bit toppy short term. the IHS target is slightly north of 98 and I have strong bigger picture resistance in the same area. CL 60min chart:
TNX is at a very important inflection point here, having completed an H&S looking towards 26, and having also formed a possible double-bottom (on positive 60min RSI divergence) targeting the 2014 highs on a clear break over 29.2. TNX 60min chart:

As I've been writing ES has broken down and retested the bottom of the range at 1826.50. The bears have an opportunity here to break ES down from this range and if that happens, there is a decent case and a technical pathway back to 1770 ES. Let's see if the bottom of this range is as solid as the range top. :-)

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