by Springheel Jack

I tend to avoid talking politics as my own libertarian views aren't widely shared, but I've been listening with great amusement on the radio this morning to UK Feminists having to acknowledge that Margaret Thatcher advanced the cause of women's rights while criticizing everything else about her.

by Springheel Jack

Margaret Thatcher, former Prime Minister of Britain died yesterday.

In my view the most talented politicians to become Prime Minister since the second world war were Margaret Thatcher and Tony Blair, and of those two, she was the only one with strong convictions and statesmanlike qualities. Adieu Margaret Thatcher,  a remnant of a bygone age when politicians ran economies without deferring to their central banker/planners, and when the solution to every economic problem, including having too much debt, was not necessarily to print money and run up more debt. In fairness she was helped in that by the head of the Federal Reserve then was the steely Paul Volcker rather than the much less impressive Ben Bernanke, but her achievements were considerable nonetheless.

SPX had a strong finish to the day yesterday and the close was at the ideal right shoulder high if an H&S is forming here. The alternative is a double-top of course and we might see that instead. I've have updated both scenarios on the SPX 60min chart below:

The pinching bollinger bands on the SPX daily chart are now only 25 points apart, in the 1545-70 range. If we do see a double-top made here I'd been leaning towards a second high in the 1576-80 rage, as failures at big resistance levels often overshoot them slightly before failing:

The ES action overnight is ambiguous. On the bear side is the marginal higher high on negative 60min RSI divergence. On the bull side the overnight action looks rather like a bull flag:

AAPL has tested the March low and there is a potentially very nice looking possible double-bottom forming there.

The pattern trigger level is at 469.65 (with a target in the 520 area) and there is strongly positive 60min RSI divergence supporting at least a decent bounce here:

by Springheel Jack

There was much talk on Friday about how the strong bounce from 1539 SPX was a sign that this market just can't go down etc etc etc.

Obviously that's rubbish, and the reversal was an almost exact reversal at the candidate H&S neckline that I've been looking at for the last few days. Encouragingly for the bear side, and as I also mentioned, the low broke the rising channel on SPX from the November low, so that is no longer support for this move from there. On the SPX 60min chart the next obvious moves are, as I posted on twitter on Friday, either to make an H&S right shoulder with an ideal high in the 1562.5 area (preferred option) or to retest the high and possibly push a little further to test or slightly exceed 1576 to make the second high of a double top. Either way the pattern downside target would be in the 1505 area:

On the SPX daily chart the low on Friday was slightly below the lower bollinger band and SPX closed back near the middle bollinger band. The upper bollinger band is now down to 1570 and and I have been mentioning, the bollinger bands are now pinching in hard, generally a sign of a big move to come:

There is another more bullish outlier option I need to mention here, and you can see an example of that in late 2006 to early 2007, when the weekly RSI moved back below 70 and then SPX crawled up another 60 points before topping out in March 2007. SPX tends to be seasonally strong in that period and I'm not expecting that here, but it's worth noting:

by Springheel Jack

I was getting some flak yesterday for saying that I thought that the wave up from November had ended and that ES and SPX were now in a topping process.

Do I know that for a fact? No. That's why I said that this was my opinion. It is still my opinion, though as I said yesterday morning, this is generally signaled with the formation of a double-top or H&S and neither of those is clear yet. I'm also looking for confirmation with a break below the rising channel on SPX since the November low.

Should I wait for strong confirmation before giving opinions like the one I gave yesterday? It depends on your timescale. The odds that we see a decent retracement here are good, and traders can play that or just look for the buying opportunity at the low. By the time we see strong confirmation however, much of the action may be over and I may well have started looking for a tradeable low. This is just my opinion, and I'm right a lot of the time, it's just a technical appraisal of the odds however. I have a crystal ball but I've never managed to get anything useful out of it. The forty bucks I paid for it on eBay was wasted I fear. :-)

I have been talking for weeks though about the very decent odds that we would see a strong reversal at either the 2000 high or the 2007 high. Why? SPX has a very strong history of making significant highs and lows at established levels, and these are the last established levels before SPX hits blue sky. To show how strong that history is I have marked up a fifteen year chart to show the significant highs and lows over that period. Look for yourself. Apologies if I missed a couple of arrows but you can see what I mean when I say that almost every significant high or low since March 2009 has been at an established level:

So what now? There are some important numbers out this morning and that may well have a significant impact on the day. As we stand here the double-top and H&S options are still both in play. ES may be forming a double or W bottom here to take it back to retest the highs. Short term resistance is obviously at the 50 hour moving average and a clear break back above would strengthen this scenario:

by Springheel Jack

All things pass on the markets, however long and strong, and it's likely that this impressive move up from November is now ending.

The rising channel from November hasn't broken yet, but I think it's going to, and that the decline yesterday signals that we are now in the topping process for the usual Spring high.

How far is this retracement likely to go? If I'm right about this being the Spring high, then there are only two main targets, and I am taking both from the weekly SPX. There have been four reversals in the last eight years from the weekly upper bollinger band when the weekly RSI 14 has reached over 70, and none of those was a bull market top. All four reached the weekly middle bollinger band, now at 1489, and three of those four reached the weekly lower bollinger band, now at 1377. That lower bollinger band may rise considerably by the time it would be reached however, and there is very strong support at the Spring high last year at 1422.38, as well as at the 200 day moving average now at 1438:

On the SPX daily chart SPX tested the daily middle bollinger band yesterday and the lower bollinger band is now at 1540, in the same area as rising channel support:

SPX usually makes significant highs with either a double-top or an H&S.

There are two candidate H&S necklines here and they are in the 1538 and 1485 areas. A hit of the 1538 level would require a break below rising channel support which is now in the 1543 area:

by Springheel Jack

The high on SPX yesterday was at 1573, just shy of the intraday 2007 high at 1576.09.

I was saying to a friend yesterday morning that the ideal place for a high here, if we are going to see a high here, is at 1576 plus or minus 4, and we hit that yesterday, but ideally we would see the high tested and slightly exceeded. This is the last chance to see a reversal at an established resistance level, as above 1576.09 is blue sky territory.

On ES there were no RSI signals yesterday, but ES is within striking distance of channel resistance in the 1570.5 area, and that is a decent fit with a test of the 2007 high on SPX:

Channel support on SPX is now clearly above the possible H&S neckline at 1538, so a hit there would break the channel:

The daily SPX bollinger bands are still pinching together and the upper bollinger band was hit yesterday. There is still strong negative daily RSI divergence on this chart which supports reversal here:

by Springheel Jack

If we were currently looking at a strong impulse wave up on ES/SPX, then the ES 15min RSI buy and sell signals would have stopped working.

Clearly therefore we are not looking at that, and ES is still trading within the channel I posted a couple of weeks ago, though it hasn't hit channel support or resistance in recent days. Right now ES is on a buy signal and is back in overbought territory, though there is no ES 15min RSI negative divergence yet:

As I mentioned last week we are now in the ideal topping zone for the Spring high in the 6 week period covering the end of March to the beginning of May. SPX also likes to make highs near established resistance zones and the only one of those now left is at the 2007 high at 1576. SPX may break through and put us in uncharted territory of course but until that happens I'm looking for a possible high there and also watching the candidate H&S necklines established at 1538 and 1485. Rising channel support on the SPX 60min chart has now reached the 1540 area, so any hit of that possible H&S neckline would now necessitate a break of rising channel support:

by Springheel Jack

ES failed to make the top of the current channel on the last move up and formed a small triangle.

That has now broken up and another test of the current high looks likely. If ES breaks above then channel resistance is now at 1566:

On the SPX 60min chart the possible double-top is still in play. If we see a move up to test the next big resistance level at the 2007 high at 1576, then this would be more likely to be an early stage H&S forming:

The daily upper bollinger band is also at 1576. Middle BB support is now at 1548:

CL bulldozed through negative RSI divergence yesterday and is close to testing 97.

The current move up has the look of a bearish rising wedge however:

There's been a lot of talk about USD this week, and the prospects for a big USD rally over the summer.

That could happen, as even though the Fed is printing hard, and this is obviously a form of devaluation, the components of the USD index are in the main looking even weaker. From a technical standpoint however I have concerns about this in the short term. The USD rally established a strong support trendline which broke a few days ago and was then recovered. The conservative double-bottom target is just over 84, and that is now in reach, but if that support trendline should break again a significant high may well then be in. I'm watching that carefully:

This USD rally only really got going when EURUSD peaked in early February. Until then the Yen and Sterling particularly were falling hard against USD, but as EURUSD is over 50% of the USD index, USD was still trading sideways. Yen and Sterling have been rallying weakly for some weeks now and EURUSD is showing signs that it may be close to some kind of low. CADUSD is 9% of the USD index and I marked in a possible rising channel support trendline sometime near the end of 2012 with some comments. Looking at that chart again this morning I see that CADUSD has bounced there, and so we may have a very significant low now made on CAD. My feeling is that we could see a significant high on USD made very shortly. Here is that CADUSD daily chart without any alterations made this morning:

ES has been dropping since I capped the chart at the top, but at the moment it is only retesting broken triangle resistance in the 1555.50 area.

The 50 hour moving average is there as well. I'm leaning long but the RSI setup is ambiguous here, and if we see a break below the last low at 1551 I'd be inclined to interpret it as a sell signal with the obvious target in the 1545/6 area.

What would I like to see happen here? That's an easy one to answer. I would like 1538 SPX to be an H&S neckline, with the ideal top of the head in the 1575-80 range. Since the 2009 low significant highs have all been at big established resistance levels and that is now the last big level standing, and therefore the last chance to see such a high. The H&S target would obviously then be in the 1500 area. I was saying in the last weeks of December that the timing was wrong then for a big decline, which would normally begin in the range between the last week of March and the first week of May. We are now in that ideal topping range of course.

Everyone have a great Easter. My next post will be on Tuesday next week. :-)

Source: Springheel Jack

by Springheel Jack

If the SPX rising channel had broken down on this recent retracement I would have little doubt that we were looking at topping action here, with a steep channel being replaced with a shallower channel prior to a significant breakdown.

The rising channel on SPX has not yet broken down however, so this may just be consolidation.

On the current ES channel an RSI 15min sell signal triggered overnight, but unlike the previous seven signals this was at the test of the last high rather than at channel resistance. This should mean that we are going to see this channel break soon. If we see a break downwards then there are decent looking candidate double-tops on ES and SPX. Here's that reversal on the ES 15min chart:

Short term ES has broken back below the 50 hour moving average and is trying to hold above the 100 and 200 hour moving averages. On a break below 1550 the path is open to test channel support in the 1542.50 area:

On SPX rising channel support is now in the 1530 area and the double-top trigger level is at 1538:

SPX daily middle bollinger band support is in the 1545 area, slightly below channel support on ES:

As I was suggesting was likely yesterday, EURUSD has continued downwards after the break below 1.288.

The next big support level is at 1.266, and the last foreign bank depositor to leave the Euro-zone should try to remember to turn out the lights:-)

CL broke back above 96 yesterday, which augurs well for a test of the Jan/Feb highs in the next few weeks.

Short term though there is significant negative divergence on the 60min RSI, and CL may have now established a rising channel with the next obvious move being a strong retracement:

The ES 15min is currently on a sell signal and the next obvious target is a test of channel support in the 1542.50 area. If we see a break below then we may well see these candidate double-tops on ES and SPX break down and play out. Rising channel support on SPX is in the 1530 area.

Source: Springheel Jack

by Springheel Jack

The channel I posted on twitter last Thursday is still going strong.

I gave the target area as 1538-40 yesterday morning and the low was 1539. As with the previous six reversals within this channel the reversal was signaled with 15min RSI divergence so we are back on a buy signal today:

Channel resistance is now at 1562. ES has been crawling up the 50 hour moving average overnight and will obviously need to break back over it with some conviction to make it to channel resistance:

One thing worth noting here is that there is now a very nice looking double-top setup on SPX. These are best when the two tops are very close together as these are. The target would be 1512 on a conviction break below 1538, though there is obviously rising channel support in the 1528 area now:

On the SPX daily chart SPX is riding up above the middle bollinger band, now at 1542. That is also significant support:

The megaphone type pattern I've been marking up but not talking about much in recent days on CL is a broadening top.

I don't much care for these patterns as they are both bad at making target (19 out of 23 according to Bulkowski), and also very misleadingly named, as these are actually direction neutral. For what it's worth this pattern has now broken up with a target back at the Jan/Feb highs. Strong resistance not far above though at 96:

EURUSD tested 1.288 yesterday as I expected and broke below it to a marginal new low. What now?

There is still a chance of a strong bounce from here but I think that ship has most likely now sailed. All things considered looking at the EURUSD and DX charts I'm leaning short here on EURUSD, which isn't going to be helped in the coming months by the Cyprus deal, even if everyone involved is claiming that the losses there by depositors and senior bank bondholders set no precedent. That's funny, but much less funny for anyone with large cash or bond holdings in marginal EU countries, and I'm expecting a steady stream of capital from these countries in coming months. Some of that will stay in the EU. Much won't:

I'm definitely wondering about a double-top here on ES and SPX, and we'll see whether ES can reach channel resistance today. If it does, watch the 15min RSI for signs of reversal.

Source: Springheel Jack