I don’t think anything of great interest will happen today as we wait for the next interim top to be made. I do think we are likely to see a touch of the lower rising channel trendline on ES, probably before the open. That should be at just under 1140ES. That would be a good entry point to go long with a stop at 1137.5.

If we should make it to 1137.5ES then the channel will be breaking downwards and that would be a good opportunity to go short. I’d be surprised if that happens today though:

The rising wedge on the SPX 60min continues to narrow but there’s still room for some more upside in there:

http://www.screencast.com/users/springheel_jack/folders/1003/media/be37a897-5163-4925-978a-0394ac3d49a1

Gold was very interesting yesterday and broke the first rising trendline support. Overnight it has approached the second support trendline and if that breaks too we may well see a retest of the recent lows under 1050:

http://www.screencast.com/users/springheel_jack/folders/1003/media/94d7ab67-c8b2-4d3a-943a-9f21ffdd7d1f

I think that we are approaching a very significant interim top in equities, but I don’t think we’ll make it today, and I’m doubtful about making it on Friday. I think that there is a very good chance indeed that this top will be signalled by two key indicators. The first is $BPNYA, the NYSE Bullish Percent Index, which has been in a gently declining channel since September. Since then it has been signalling the key interim tops and bottoms very well. It is close to the top of the channel now, but still looks at least one push up away from hitting it:

http://www.screencast.com/users/springheel_jack/folders/1003/media/dba7fa24-75f7-48c7-81dd-7844da9a1ac5

The other indicator is EURUSD, which has been in a steep declining channel since December. It isn’t the strong positive indicator for equities that it used to be, nowadays when it trends down strongly then equities still tend to follow, but when it is trading sideways, as it has been over the last few weeks, equities have been rallying strongly.

Nonetheless, the last bottom on equities was signalled by EURUSD touching the bottom of the declining channel, and I think that there is a very good chance that the next interim top will be signalled by a touch of the top of the channel. EURUSD has been trading sideways for so long now that the top channel trendline has fallen to meet it, and it is now within easy striking distance at 1.376 and falling:

http://www.screencast.com/users/springheel_jack/folders/1003/media/ceaff196-3552-4144-9452-88678347a572

My favorite trading setups are trading channels with the channel trend. EURUSD in recent weeks is a good example of why counter-trend channel plays are much riskier propositions. I chart and trade patterns as well, rectangles, triangles and wedges mostly. I am watching two interesting rectangles at the moment, and one is the very longstanding weekly rectangle on XLF, which is testing the top border of the rectangle at the moment. I am expecting this to pull back within the rectangle for the close on Friday and will be concerned about the bullish implications if it doesn’t:

The other rectangle that I am watching with great interest is the daily rectangle on TLT, which is approaching the lower trendline at the moment. It looks like a strong buy at 88.25 with a stop at 87.25. A daily close at or below 88 would be a signal to exit the trade as it would be a close below the rectangle, indicating to a target at 84.5. Long setups on rectangles are safer than short setups as they are mostly a bullish pattern, breaking upwards 69% of the time:

Have a great day’s trading everyone!

Well, there was no correction on SPX today, after the pullbacks last night and late afternoon failed to go  anywhere. Equities still look ripe for a correction here, but the chance that there will be a strong one before opex is diminishing as we approach opex week.

There really isn’t much room left in the rising wedge on SPX, but they do resolve upwards 31% of the time:

ES is still in a strong rising channel, and we have not yet touched the bottom trendline of that channel since last touching the top trendline. The chances are that we will touch the bottom again before returning to the top, but that will be a buying opportunity until we see a break of that trendline:

The IHS on the SPX daily is still very much in play, and the closer we get to a new high, the more likely that it will play out before we see a significant pullback. By my reckoning the target of the IHS is 1172, which would be close to where the mid-channel trendline is on the main SPX rising channel:

Oil is showing definite signs of weakness now. USO broke the lower trendline of that rising wedge on the 60min chart in the closing hours yesterday.

http://www.screencast.com/users/springheel_jack/folders/1003/media/54858cc6-cbe7-4b49-ae90-6eac6d0ad9ba

However we still need confirmation in my view from a break of the rising wedge on the oil futures. That looks close, but we could see a little more upside first:

http://www.screencast.com/users/springheel_jack/folders/Jing/media/e326bef2-4136-4e79-a513-2be149408b41

The potential wild card here is USD as ever. While USD was last rising strongly, equities fell while it rose, and it appeared that the inverse correlation with USD was back. Since it peaked and then moved into a sideways trading range equities have recovered strongly. It may well be that when EURUSD hits the top trendline of the declining channel then USD will start another wave up, and equities will then pull back:

http://www.screencast.com/users/springheel_jack/folders/Jing/media/37b1e970-6b1c-4601-85d5-6e2a67645867

EURUSD has now been trading in this range so long that the top of the declining channel could be hit at 1.375 or so, or lower, depending on the time taken to hit it. If we hit it at the end of opex week, that could well signal a significant correction.

A lot of charts are looking toppy here though. Oil particularly looks very ripe for a correction, and one of the best other indicators of a significant top in recent months hit target yesterday, and that is the very longstanding rectangle on the XLF weekly chart:

http://www.screencast.com/users/springheel_jack/folders/1003/media/f72c0777-63bd-4379-8406-1c598746d056

Unless that rectangle is finally breaking upwards, that is a strong signal that equities will be pulling back in the near future.

Another very strong sign that a significant interim top is close is the CPC chart, which dipped below 70 yesterday. Every time it has done that in recent months, it has signalled that complacency is at a high, and that we are therefore at or near a top:

http://www.screencast.com/users/springheel_jack/folders/1003/media/fa05e4e2-b893-4979-b2f0-ecaefb17ea76

Well, equities have had one hell of a run and the chances are strong that there are new highs coming on those indices that haven’t seen them yet, notably SPX, Dow and the Transports.

Nothing goes up in a straight line though and there’s a rising wedge on the SPX 60min that suggests that we may be retracing in the near future:

The rising wedge indicates to 1085, though that looks a very long way down from here and a retest of 1112 is probably a better target. A break with confidence of 1135 SPX during trading hours should signal that the wedge is breaking downwards.

It looks somewhat different on ES however, where there is a perfect rising channel. We’ll need to see a break of the lower trendline at 1127 (and rising) to be confident that we will see a significant retracement.

Oil also looks toppy here, with USO in another rising wedge without much room for further movement:

We’re likely to have a bullish week next week as we rise into opex, but there’s definitely some room for a retracement this week, now that the recently almost invariably bullish Monday is out of the way.

One thing that has been very notable in the last few days has been the absence of volume during this very strong surge upwards in equities. It is very visible on this 60min chart of the QQQQs where we can also see that the Qs have been scraping the top trendline of the likely channel, while developing significant negative divergence on MACD, flat RSI, and stochs that look as though they are turning down:

http://www.screencast.com/users/springheel_jack/folders/1003/media/0cdc7e4d-53ba-4780-bc7f-94c3739e9451

The rise in equities has been powerful, but there hasn’t been much volume conviction behind it.

There’s room in the SPX rising wedge for a tag of 1145 tomorrow morning, but not much more I think. I’m short a half position from 1139. if we do tag 1145 tomorrow morning I’ll be doubling up.

Good trading everyone.

Pre-open notes:

It looks as though we may gap down out of yesterday’s range before the open, and we are well below 1136.77 at the time of writing. If we do, then historically we are very likely to keep running in the direction of the gap and the bears will have a good day.

The key is the rising channel on ES. The lower trendline is at 1129.5 ES now, and should be over 1130 ES by the open. If we bounce at the lower trendline we could see another visit to the top of the channel before we correct. If it breaks then that will be unlikely:

http://www.screencast.com/users/springheel_jack/folders/Jing/media/22daca03-420c-4b6f-82f2-af1b02f6c231

Hi everyone

I hope you’re having an excellent weekend! It’s sunny gorgeous and so nice here in Florida. I had a great weekend and am rested, refreshed and ready to go for Monday.

Now what is going on here and what can happen going forward.  Now Friday we know what happened, the jobs number came in better than expected from the BS that was put out all week about the snow and cold keeping folks from going into work. Now that was a total set up by the government to low ball the expectations so when the number came out, it sounded so good! Well the truth is what they didn’t tell you is that if a person showed up at work for an hour the whole month they counted the person as employed.   So to say it was shewed is an understatement!!!

They are propping up this market with the retail trader to wait for the kill. (institutions) They are waiting till the last schmoe gets bullish and runs the tape up to hit the nuclear sell button!  There was no volume on Friday less than 2 millions shares on the SPYs. That means only the retail guy bought the jobs numbers. There is a double top @ 115 on the SPY and `1150 on the SPX. If they can’t push it past 1144 on SPX in short order that is considered extremely bearish.
BTW there the SPX is overbought on the 1, 5, 10, 15 , 30, 60 daily, weekly charts,  check out your stochastics on the charts, can they stay up there, no not indefinitely some profit taking will come in even if it’s short term.
There is even a possibility that the tape will turn over Monday.  I do know that we are close to correction coming and once that happens I will happily go long, but to do that up here at these levels is just too hard to do. I can go long on specific stocks, I will not do so on the indexes.

However on the other side of the coin you can see if we do NOT reject 1150 and go down hard, should we go to 1148 -1152 and go sideways for a bit, the there is a nice inverse  H&S that could be forming and we could go on up to 1180 on the SPX  …so keep an eye on the charts for that.

Now here is chart on the SPX

Now the reason I am leaning towards scenario #1 is because of where the $VIX is at. With the VIX this low, it is telling me that a sell off is imminent.  But that could changed if the tape continues sideways with only a slight sell off. Being a trader you have to keep in mind all the different things that could play out. Either way there is some kind of down move coming shortly, I have in mind we could even see 1100 this week by weeks end.

Now here is chart of the VIX

The VIX is close to a double bottom @ 16.26 and boy is that complacent! So it’s do or die now for the bulls to hit the sell button and for the bears to grab a piece of the pie!  (or salmon in their case) if not the bull are going to consolidate sideways and run up to newer highs next stop 1180 then possibly 1228.

So this week should be quite interesting

Also this OPX is quadruple witching so it will be even more crazy then usual.

GLTA this week

While the SPX has been chopping around uncertainly for the last three months, USD has been having a very significant rally.

Much to the bear community’s disappointment given the longstanding inverse correlation between USD and equities, USD has taken back all of the losses since the beginning of July while SPX has yet to surrender any gains.

What does this mean? Well it means that it has been much more fun trading USD lately than it has been to trade equities, and it also means that USD can no longer be relied upon to give much away on the direction of equities. There is a strong inverse correlation still when equities are trending downwards, but no longer when equities are pushing up.

That said I think that there is a significant possibility that USD hitting the bottom of the current channel will signal another push downwards in equities, just as the recent bottom on SPX was signalled by EURUSD hitting the bottom trendline of its declining channel at the same time.

First, and most importantly given the large trade weighting, EURUSD is in a strong downtrend channel. Since hitting the bottom of that declining channel EUR has been chopping around uncertainly, but made it to 1.375 yesterday before falling back. If it can make it back to the top of the declining channel at about 138.5, that will present an outstanding risk/reward short opportunity and may signal the end of the current upwards chop on SPX:

GBP has been falling hard and recently fell through fan support to reach as low as 1.478. It has recovered somewhat since and looks as though it may rise to retest that broken support at about 1.53:

http://www.screencast.com/users/springheel_jack/folders/1003/media/aed3e091-97b7-4594-bd1d-df6e93538377

The Swiss Franc has, like the Euro, been falling in a strongly declining channel. After hitting the bottom of that channel, it slid down the lower trendline for over two weeks before recovering strongly this week. It is currently paused at a significant resistance level but if it can break through should make it to the top of the channel at about 96.

http://www.screencast.com/users/springheel_jack/folders/1003/media/42e896dd-2fe8-4325-ac75-2835c960917e

Those three currencies are all in strong and well established declines against USD, but that isn’t the case throughout. The Australian Dollar has only just broken out of a strong rising channel and may be forming a broadening descending wedge. Regardless though, it is rising at the moment and the next obvious target is the strong double resistance just under 92.5.

http://www.screencast.com/users/springheel_jack/folders/1003/media/44e8a9b6-909c-49fc-a3f2-636fc3efadb5

The Canadian Dollar is still in  strong rising channel, though it appeared a couple of weeks ago that it might be about to break downwards from it. If it can push through rsistance to make a new high, the next obvious target is the top of the rising channel at about 103.5. It is possible that it has been forming a bullish rectangle in recent weeks however, and may turn back down here:

http://www.screencast.com/users/springheel_jack/folders/1003/media/1c046e3f-aed1-4392-b298-ff373ed53632

The Australian and Canadian Dollars have been relatively strong because they are commodity currencies, and commodities have been insulating their economies to a large degree from the financial turbulence elsewhere. More mystifying is the Japanese Yen’s status as a ’safe haven’ currency, given that that the national debt there is on a scale that if reached elsewhere, would prompt credit downgrades and serious discussion of sovereign default.

Nonetheless, the Yen (JPYUSD) is still in a broadening ascending wedge in an uptrend from July 2008. That wedge has two strong internal support/resistance trendlines and the Yen has now pushed back up from the bottom of the wedge to the first internal trendline. There is strong resistance there and the Yen may turn back, but if not then the next target is in the 118 area.

http://www.screencast.com/users/springheel_jack/folders/1003/media/bec07788-72bb-46c5-8d5b-4ceeae9c50bd

All of these are trending against USD of course, and the USD rally has reached an interesting point. After reaching the top of the rising channel a month ago it has continued rising and has touched but failed to take and hold the 38% fib retracement of the previous decline. It now appears to be declining back to the bottom of the rising channel which on UUP is at about 23.4.

There is a significant risk here of course that the USD rally may be over. It has touched the 38% fib and has failed there so far. It could now resume declining. Given the parlous state of the Euro, and the fact that in PPP terms the Euro is still over 25% overvalued relative to USD that seems unlikely, but the risk is nonetheless there.

I won’t be around much today though I might be checking in a couple of times. Everyone have a profitable day.

Hi Hobsters, sorry it has been a bit since I posted, I am working feverorishly on OBB most of my time, but also would like to at least keep this forum for those of you who are both bullish and bearish and net neutral and want to make $ on both sides.

For the next few day I expect nothing but chop chop and more chop, we could make one last final high to 1127.00 or Ms Market might just fool us and turn quickly to catch shorts off guard.

What am I do well I am net short with a long hedge or two, to get the realtime trade of course those are on OBB.

Petsmart a store close to my own heart is out after the bell and should be a big mover. I do have a trade on it of course.

Here is an updated chart of the SPY

So tread light and carry a big bat IMHO they will try to retest the 1122.75 and possibly grab that 1127 today.  Good Luck to all!

I was shocked to find a beautiful channel on the SPX daily chart last night that encompasses the entire rally since March 2009, with the top and bottom trendlines traced from the November 2008 and March 2009 lows respectively.

It has only become obvious with the recent low at 1044, as that provided the second touch to define the lower channel trendline:

I was shocked because I thought that the SPX had broken all key uptrend support trendlines, and it is now clear that just isn’t the case. The uptrend channel is still intact.

On the plus side we now have a very powerful indicator for when this uptrend does finish, as confirmation will come with a break with confidence of the lower trendline. In the interim the centre trendline should provide significant resistance in the event that another substantial wave up gets going. I couldn’t help noticing that by the time we would reach it in the 1180 – 1200 area, it would be in the region the potential  IHS on SPX is indicating to.

Not a cheery read for bears I know.

On the other hand all channels do break, and this one could break soon. it is a rising channel and a retest of 1044 would more than accomplish that now.

I do have something more cheering for bears to read as we are coming up to the pivot cycle date for my version of Joe8888’s 40 day pivot cycle. My (slightly modified) version runs 41 days with the 42nd day not counted, and on my chart the 41st day is next Monday 7th March. Unless we have a major selloff between now and then, this should be a pivot high like the last one in early January:

In the very short term we almost made it on Tuesday to my next upswing resistance line at the broken blue dotted trendline on the top SPX chart. I’m not expecting that resistance line to be broken before the next swing down, but we could spend a few days testing that (rising) trendline before the next swing down begins.

Well, after the failed bear breakout last week, the downtrend trendline since the January top and the recent broadening descending wedge were both broken in listless trading on Friday:

The broken wedge only indicates back to the formidable resistance in the 1112 to 1115 area, which was retested again in overnight trading.

In the event that resistance is broken, the obvious next resistance is at the blue dotted trendline on this SPX daily chart:

EURUSD looks as though it has now broken up out of the broadening ascending wedge that has confined it in recent weeks. The obvious target if that can be sustained is the top of the main declining channel at 1.39 and falling. EURUSD has weakened overnight though and looks so fragile that it seems doubtful that it could make it that far:

I’m doubtful about significant upside this week. The bears had their chance last week and now we’ll see if the bulls can do better. As it is Monday, their best chance is today. We shall see.

The simple lesson’s we once knew (By mmTesla)

The foundation of price movement as we all know lies in supply and demand. Take the emini, all it is intraday is an auction of who is willing to buy based on sentiment whatever that may be at the time. We have all heard of trading ranges, but for the sake of mutual understanding here is an example:

Chart is annotated.

http://screencast.com/t/YmIyODll

That is an intraday example of buyers and sellers carrying out the auction. Often times you may see a strong move up and consolidation for a few days then test lower. What is happening? Sellers who bought lower are selling, when prices fall back often to previous volume points of control or accumulation areas, it is solely price discovery to see, do we still have buyers down here? When a trading range breaks, sellers close the cupboards in the pursuit of a higher price to sell at, shorts begin to cover and as a result price goes parabolic.

My view of market price is that big buyers buy and later sell at higher prices, market makers, floor trader and other insiders brutalize the tape in between these major areas of accumulation and distribution.  Here is an example of something that may play out this coming week:

http://screencast.com/t/MWY0OWU2Yzkt

The target for if this unfolds is unknown however sellers have found that people are willing to buy above 1100, so if they accumulate they will look for buyers, and prices will continue until buyers and sellers once again hash out price.

Why these areas? Mainly due to the low volume pockets, especially given the much larger volume below where buyers and sellers have hashed it out and price has moved higher.  Where do trendlines and other examples of TA come into play, they are just an aspect for sellers and buyers to decide to distribute or accumulate. Notice when these are broken either supply or demand evaporates and prices sprints to find either supply to meet demand or vice versa. Re -testing trendlines, prices have broken above and have now met distribution and profit taking, they fall back looking for more buyers, if found the trend continues.

This may seem blatantly obvious as you are reading this, however I feel it is often overlooked. If you change your perspective of what your trading, for example if you view an emini contract as a physical asset and you see that people are willing to buy at 1110 and we are at 1065 where buyers and sellers previously hashed out price, then it is something worth buying to sell later on at a higher price. In order to do this you need to take long term bias out of the equation, price isn’t always reflective of terrible economic conditions, ask your self, are their buyers willing to buy higher up given previous price movement? If so, and you are near an area of accumulation than assume prices will rise and vice versa if we are at extreme levels and buyers aren’t found and there are areas lower where buyers viewed it as cheap go short. That is the essence of mean reversion trading.

Big picture:

http://screencast.com/t/ODgwYWNmO

The red line appears to be a place where major distribution would occur. A few reasons for it is that people who have held through this mess want their money back and would be taking it. Imagine Microsoft where it took a very long time for prices to break 30 per share because each time, millions of people tried getting out near the price they originally paid.  People who held through this aren’t going to trust the market and want out if we get there.

Hey everyone, I am rested relaxed and ready to go this week. Now what is in store for us this week. Well it’s a toss up there is really nothing to bring us down, so we need to keep a mix of different positions and be light on our feet. I do expect at this point we might see 1150.75 before we see 1020.

Should we open up weak tonight we could trade down to 1075 area, but that doesn’t seem to be in the cards. On any weakness this week I will close I will close most spy puts unless I see major weakness. (which could happen) it’s all about the $ and if Ben and Company are to hint at a rate increase sooner than later, or even raise interest rates (although the probability of that is next to none) their language will be key! !Any strength in the dollar most likely will be weak for equities.

Personally I think we chop around till traders see what Ben & Company come up with this week.

Now here is a chart of where we are in the EUR/dollar as of now

on the buy side

FAST
GRMN
HMC
NVDA

on the sell side

DZZ
GAP
IEF

Plan on a Monday that is most likely a whole lotta nothing until the FOMC minutes are out love peace