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Monday, 25 August 2014

Some Retracement Imminent ..... Probably

ES is well up overnight, and if that continues into trading hours, then there is an obvious target and significant resistance at the daily upper band, now at 2003 but possibly moving as high as 2005/6 on a strong open today. If that is hit and we see a strong rejection there that would then open up the daily middle band, currently at 1952, as a possible retracement target. SPX daily chart:
There was some weakness/consolidation on Friday, and that did not hit the obvious trendline targets for a retracement. I have rising wedge support in the 1978 area this morning, and have added a scenario on the chart for a possible target in the 1974 area, as there is a nice confluence of support levels there. SPX 60min chart:
I've included the NYA chart this morning as this may be a useful indicator early this week. The overall pattern on NYA is a very nice looking falling megaphone from the high, which is very likely to break up soon with a target at a test of the current all time highs. That's because as well as being a bullish leaning pattern, the megaphone also did a bullish underthrow at the last low. As long as NYA doesn't break up and make that target this morning, any retracement here is very likely to reverse back up afterwards to make that target. Obviously that megaphone may break up and make target today, in which case that reassuring unmade target would be lost. NYA 60min chart:
On my RUT chart the short term double top setup that I was looking at on Friday morning is forming well, though I am concerned at the strength of RUT futures overnight. I still like the retracement scenario that I laid out on Friday morning, and the IHS currently looks unbalanced with a comparatively very small right shoulder. Have I seen IHSes like this break up and make target in the past? Yes, more than once. I'll be watching this setup carefully as a very strong and sustained break over the neckline on RUT today would be a big warning signal that equities may be accelerating to the upside. RUT 60min chart:
Are we going to see a retracement early this week to test the support trendlines on the various US indices 60min charts? I think so, but short term such retracements are counter-trend of course, and if we are going to see a break past 2015-20 resistance in coming days/weeks then it might be that we would see those support trendline tests after that and obviously at a higher level. I'm more confident here that SPX will at minimum return to at least retest the highs after that retracement than I am that we see that retracement. I'll be watching the NYA and RUT charts for clues today, and will be actively looking for a decent looking short term high to short for a retracement today or tomorrow. That retracement may not happen however and that needs to be borne in mind here.

I did a weekend post on USD, EURUSD and bonds yesterday that has some long term charts that are well worth a look if you haven't already seen them. You can see that here.

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