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.
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:
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:
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:
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:























