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Tuesday, 28 January 2014

Testing Serious Support

I was talking about the cluster of support levels in the 1768-80 SPX area yesterday morning and the low was at 1773. That has tested the weekly 20 and 50 MAs, and is a second retest of broken wedge resistance. There is a little play left in this support area but if we aren't to see a much larger correction develop then this is the likely reversal area. SPX weekly chart:
It may be that the short term low is now in, though I would say that my target at the possible rising channel trendline from 1646 has not yet been hit. if we were to now see a test of yesterday's low that would open up a possible hit of that trendline and would deliver positive divergence on the 60min RSI. That may not happen but it would be a tidier low. SPX daily chart:
Most declines tend to develop a pattern and in this case the pattern is a reasonable quality falling wedge from 1846. Wedge resistance was tested at the RTH high yesterday and is starting today a couple of points lower than that. we may well however see a test of the lows before a break up. SPX 15min chart:
On other markets EURUSD has reversed back down from the failed break over 1.37, though this has the look of a possible bull flag so far. EURUSD 60min chart:
I'm watching gold to see whether it can break back over the key resistance level at the 150 DMA (1290 area) and declining resistance (1310 area). If it can then the bear market in precious metals since 2011 should be over. Short term however a 70% bearish rising wedge on GC is forming, which suggests that key resistance may well not be broken on this move up. GC daily chart:
I've been considering the case for a big rally on bonds starting at the moment and there is strongly positive divergence on the ZB weekly RSI. There is a part-formed double-bottom there which is equivalent to the double-top forming on TNX. These RSI divergence don't dictate that these will play out, but they are very supportive. ZB weekly chart:
SPX has been trading entirely under the daily lower bollinger band since the break below on Friday. resistance yesterday was at a retest of the lower bollinger band and that may be the case again today. if so then i am not expecting the SPX daily lower BB to close much below 1788 SPX and that would be a resistance level to watch. On a break back above the next serious resistance is at the 50 DMA in the 1812 area.

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