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Tuesday 15 April 2014

Rally Resistance Levels

I was explaining yesterday why I think that the current move on SPX is just a rally within a downtrend that has not yet bottomed out. That means that I am watching the significant resistance levels above in the expectation that one of those will be a brick wall at which SPX will reverse into the next move down. Yesterday the rally closed at 1830, on the weekly middle band that broke on Friday and is significant short term resistance. It may be that the rally will stall there, though we might also see a break over that resistance and then a return to close back on or underneath it by the close this week. SPX weekly chart:
On the SPX daily chart the important resistance levels are the 50 DMA at 1845 and the middle bollinger band at 1860, which is the highest of the rally targets that I am watching here. SPX daily chart:
The two most significant resistance levels that I am watching here however are on the SPX 60min chart, and they are the 50 hour MA, currently at 1850, and falling channel resistance, which closed yesterday in the 1853/4 area. Both are falling rapidly and if SPX were to just trade sideways into Thursday then both could well have fallen to the current levels. That is an option but, Yellen permitting, I have a more immediate alternative that I'm also considering. SPX 60min chart:
That more immediate alternative comes from the double-bottom that has formed on SPX after the retest of Friday's low yesterday afternoon. That pattern has a target in the 1854 area, and for that to be hit within the falling channel that would really need to be hit this morning. I was thinking that Yellen's remarks this morning might give SPX a push but the effect seems to be muted so far. A possibility to consider however. SPX 15min chart:
Last chart of the day is USD, where I mentioned near the end of last week that the second low of a short term double-bottom may have been made. This would be the smaller of two nested double-bottoms that could take USD back to the 84.25 area, and I've marked the structures and targets for those patterns on the chart below: USD daily chart:
As I explained yesterday, the overall technical odds still favor the bears here, and after this rally I'm expecting another leg down to start with a target somewhere in the 1730-80 SPX area. I would normally expect that the current falling channel would hold on this rally, though that isn't required, and so key resistance is now in the 1850-5 area. That will drop by ten points or so per day so within two days that resistance will be at yesterday's highs, and SPX may just trade sideways into that then. Either way I'd recommend not getting too attached to any long trades for the moment.

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