Daily Archives: July 16, 2010

ES Pinned at 1100 for Opex? (by Springheel Jack)

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When I first drew the rising channel on ES a week ago it was tentative,
the last hit of the lower channel trendline was at 1016 and ES traded
only in the top half of the channel after 1037. This week though ES has
touched the top of the channel and then fallen to bounce at the bottom
of it, so the channel has been thoroughly confirmed now, and until ES
breaks down from it, the short term trend remains up, and this is a wide
enough channel that we could rise a lot further within it. I am long ES
until we see that channel break with conviction.

That said, since we hit the top of the rising channel at 1099 we may
have been forming a right-angled and descending broadening formation,
and if that continues to form, the next move down will break the lower
trendline of the channel. If so, I would expect to see another high made
near 1099 beforehand.

We are going to break out of the current range, one way or the other,
before the open on Monday. As resistance we have 1099, tested three
times and unbroken so far, and as support we have the lower trendline of
the rising channel, currently at 1087 and rising at ten points per day,
so by Monday's open the current trading range will have compressed
almost to zero, and we will have seen a break one way or the other.

100719_ES_60min_Rising_Channel_and_RADBF

We have had a strong run up to here, on on the SPX daily candles at
least, without any significant declines on daily closes. While 1099 ES
remains unbroken, it may yet hold as an interim top, and there are some
divergences to suggest that this rally may yet fail here.

USD broke key support yesterday, and to my eye the USD rally now appears
to be over, but though I was expecting that 30 year treasuries would
fall through rising support as well, they have instead bounced strongly
after hitting it. That is strange to say the least, and if this equities
rally goes up much further then that must reverse IMO:

100719_T30Yr_Daily_Support_Trendline

The Vix has been rising for the last three days, and that is a
divergence that we saw before both the January and April tops:

100718 Vix Daily Divergences

I use the Baltic Dry Index as a loose indicator of the health of the
world economy and it looking very sick at the moment. That might just be
because all the ships ordered in 2007 and early 2008 are been delivered
and are depressing shipping rates of course, but it is still striking
to see the BDI only just above the March 2009 low:

100718 BDI Weekly Wipeout

EWI posted, and TK reposted an interesting nine day turn cycle that has
been important on SPX over the last three months. We are on day nine of
the current cycle, though as CC Rider pointed out the other day, the
intraday low of the last cycle was actually on day eight:

100718 SPX Daily Nine Day Turn Cycle

I'm expecting that SPX may well be pinned at 1100 SPX for opex. We may
have to wait until after the weekend for anything really interesting to
happen.

The Euro Rise is Over

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Back on July 1st, I wrote in a post that "A look at the EUR/USD implies a push to 1.3 before a resumption of the fall is in the cards"

I based this on the inverted head and shoulders pattern – very cleanly defined – in the chart. If I had been a bit more precise in my presentation, I would have said 1.306, but what's six pips between friends?

In any event, I think this predicted rise has been beautifully fulfilled and is now over. Check this out:


0716-eur

There's a magnificent confluence here. First, the simple arithmetic circled in red shows the measured move for the IHS pattern, which is the aforementioned 1.3006. The Fibonacci level, 1.30553, is the 61.8% retracement for the entire life of the EUR/USD. Clearly these are almost exactly the same.

I would very much like to see a resumption of the tumbling Euro since (a) I'm super-short right now; and (b) my largest short, by far, is the FXE.

Strap yourselves in for an interesting OPEX day.