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Tuesday, 4 February 2014

So Now What?

Well I said yesterday morning that the day was going to be a very important test for bulls and so it was, with a massive bull fail as strong support in the 1770 SPX area broke and SPX fell very hard towards the next big support levels. I posted a falling wedge on ES yesterday morning and that broke down with a target in the 1720 ES area. The overnight rally looks a lot like a bear flag so it may be that we are going to see that 1720 target made today. ES 60min chart:
On the SPX 60min chart the low yesterday was very close to a significant trendline, that being rising (possibly channel) support from the 1560 low. I don't think this is a likely retracement low but I'll be watching that trendline. Positive divergence is building on the 60min RSI and a bounce doesn't look far away here. SPX 60min chart:
Assuming that rising support from the 1560 low doesn't hold, what are the next important support areas? The first is the 200 DMA, now at 1707. The 200 DMA is an important support level and is well overdue a hit, as it wasn't tested in 2013. Below that is rising (poss channel) support from 1074 SPX in the 1645-50 area. With the 38.2% fib retracement of the move up from 1343 in the 1657 area that is a target that I'm considering here. SPX Daily chart:
On the SPX weekly chart the next important level is in the 1678 area, at both the 50 week MA and the weekly lower bollinger band. Again, this would not be a bad fit with a hit of the rising support trendline from 1074, and also with a test of the October 2013 low at 1645. SPX Weekly chart:
TNX made the 26 target for the H&S yesterday, and has dampened though not eliminated the positive RSI divergence that I was looking at yesterday. What happens next is very important as there is a major possible double-top trigger level at 24.71, and it TNX breaks and holds below that the double-top target would be 19. As I've mentioned before that would not be out of line with previous bonds rallies at the end of QE periods. TNX 60min chart:
EURUSD made the double-top target there yesterday and as with TNX I am watching to see whether EURUSD will now break below the large double-top trigger level at 133.18. If so that would trigger a double-top target in the 127.2 area. EURUSD 60min chart:
I am expecting to see a decent bounce on SPX start soon, but am leaning towards at least a test of yesterday's lows before that happens. The obvious target for that bounce would be a retest of broken support in the 1765-70 SPX area.

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