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Tuesday, 29 April 2014

No Cigar

The bears put on a brave show yesterday trying to break down through support but the afternoon rally wiped away the losses, and SPX closed well above support at the daily middle band and the 50 DMA. Now, with 16 of the last 18 Tuesday having closed green, the bulls have their shot at breaking out of the current range. SPX daily chart:
The first order of business for bulls today is to break back above the 50 hour MA, which was resistance just above at the close yesterday, and then to break above falling megaphone resistance for the current retracement. I have that in the 1874 SPX area at the close last night and it's possible that we could see SPX gap over that at the open. If that breaks (and holds) then the megaphone target will be a retest of the 1883.27 high, and if that is broken then the path will be open to retest the 1897 high. SPX 60min chart:
However I would attach more importance here to the much larger falling megaphone on NDX, and the bulls' main target here in my view is to break (and hold) above megaphone resistance there, currently in the 3595 area. That would open up a test of the 3717.36 high, which would most likely be accompanied by new highs on SPX. As with SPX the open double-top target that I noted on the chart yesterday morning was reached at lunchtime yesterday, so there is no longer unfinished business below on either chart.  NDX 60min chart:
On other markets I'm still watching the possible double bottom setup on GLD. That would target the current rally high at 133.69 on a decent break back over 128.35. Given the strong performance of the 50 hour MA as support in uptrends and resistance in downtrends, I'd be concerned if GLD broke back below that. GLD 60min chart:
I posted the USO 60min chart early last week looking for a move to rising megaphone resistance, and that was hit yesterday. This megaphone will most likely break down in a few days, but short term there is some positive RSI divergence supporting a bounce here. USO 60min chart:
Moving to a closer up view of the CL chart, you can see that there that megaphone support trendline has already broken slightly intraday, but there is a strong short term bull case based on the falling wedge that broke up overnight, and the possible double-bottom that would target the 102.66 area on a break over 101.50. A possible retest of the 104 area high is perfectly possibly without negating my longer term bearish view. CL 60min chart:
So what of today? Well 16 of the last 18 Tuesday's closed green, the day yesterday was, overall, a significant bear fail, and significant upside today could well propel SPX to new highs within days. Let's see whether the bulls can do better than the bears. There is also FOMC today and tomorrow of course, though that is possibly a two edged sword, given that the next sliver of taper will most likely be going ahead. For today at least the bulls start with the ball and I'll be leaning bullish until demonstrated otherwise. A decent AM low today should most likely be a buy.

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