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Wednesday, 10 December 2014

Bears Will Be Bears

Another classic V shaped day with a very strong gap down where the gap was filled by the close. Pretty much par for the course for the feeble bears of 2014 and unlike the low on Monday last week, the low yesterday is a decent candidate for a post 5 DMA run retracement low.

Yesterday morning I gave my target range on SPX for this retracement as 1995-2033, with a likely retracement low time area between yesterday and tomorrow with an ideal low made today. Yesterday's low was at 2034.17, so that was effectively a hit of the target range, within the target time window. I'm counting that stat as played out now, and any further downside is a bonus before the continuation upward that I am expecting.

On the daily chart the low yesterday was two points above the lower band, which I count as a hit, and the close was two points above the middle band, which I count as a hit of the middle band rather than a break back above it. We may see a reversal back down here at the middle band, but if we see a close (3+ points) back above that today the break back up should be respected. There are still open daily sell signals, but they won't be invalidated unless RSI breaks back above the higher of the divergent RSI highs, and after this retrace we could run up to over 2100 without invalidating these. SPX daily chart:
That's not to say that we can't retest yesterday's lows and we could see that happen. A rising megaphone formed from the low yesterday and these break down about 70% of the time. If it breaks down at the open then there is a double top setup here that would target the 2042 area on a break below 2051. We may well see that this morning, and regardless there are very decent odds that we see at least some retracement today. That may extend into a full retest of yesterdays lows, but I'm doubtful about seeing much more. SPX 1min chart:
Gold and silver broke up from their respective falling megaphones yesterday. I'm expecting a retest of the lows on both and I'll be looking for a long entry there if seen. Silver daily chart:
I'm wondering whether we may be seeing a double bottom form here on oil. Oil is overdue a decent rally. WTIC daily chart:
I'm looking for some downside today unless we see a strong break back over main resistance at 2068. My expectations for that downside aren't huge and I'll repeat again that this retrace was only ever likely to be a short break before a resumption of the uptrend. That uptrend may have already resumed at the low yesterday.

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