Well, it's an eerily quiet day, and I don't have a lot to talk about, so I thought I'd just share a couple of long-term fan studies on the S&P and let this post sit here until the close.
These fan lines are drawn in ProphetCharts on the S&P 500.
One set starts on June 30, 1932 and ends on March 24, 2000.
The other set starts July 8, 1932 and ends on October 11, 2007.
The ability of these lines to act as support and resistance over the decades has been stunning. I also find them to be very valuable on a going-forward basis.
Looking at the chart below, it seems to me a reasonable target before the end of 2011 would be a low somewhat higher than the October 2008 low. If there is a real sea-change in the world's economy, the next major drop could take us into the mid-400s.
My GDX short is one of my best performers recently. The precious metals kooks are probably pulling their hair out recently, and miners – – supposedly the last bastion of true bullishness – – are one of the few ETFs down hard today. I think this could sink as low at about $43 before any meaningful recovery.
Just a quick post today as I'm very busy.
It was a nail-biting top but SPX topped and turned where it was expected
to on this chart and channel that I posted at the recent low at 1010.
The bear scenario for the summer is still therefore my primary scenario
with an expected interim bottom at 870 within eight weeks. :
Looking at the recent top more closely on the SPX daily chart, as well
as this rather sloppy looking channel, there are a couple of other
things to note.
Firstly a sharply downsloping head and shoulders pattern is forming,
which is yet another pattern indicating into the high 800s in the event
that the neckline is broken and the pattern confirms. The main thing to look for on H&S patterns with sloping necklines is that the shoulders should nonetheless be of roughly equal height. That is definitely the case on this pattern, so I am adding it to the even larger main bearish patterns on SPX at the moment that are indicating towards the same target.
Secondly both RSI and MACD have formed clear support and resistance
trendlines that signalled the recent top, and are worth keeping an eye
as they may well signal the highs and lows over the next few weeks.
In the short term, Friday was a trend down day and we would normally
expect to see two to five days of retracement after a trend day. I'm
expecting two, and my target for the retracement is the strong range
resistance level at 1084.5 ES. It may be that we only reach the
resistance level at 1074 though.
On the ES 10min chart a short term rising support trendline has been
established since Friday's low, and if it holds then the range support
level at 1064 should hold. If it breaks I'm expecting to see strong
support at 1054.5:
If the bear scenario for the summer plays out as I expect, then the next
two days will most likely be the last really good opportunity to short
it. I'm expecting to see a retracement to 1085 SPX and if so, then a
short from there has 215 handles of potential downside, while a rise of
only twenty points from there to above the recent high would signal that
the bear scenario was in trouble, and would therefore be a good place
to put stops.
That's a risk reward ratio of more than 1 to 10, and I'll be taking
full advantage of that.
Good morning, everyone.
There's nothing but the silhouettes of trees outside here in Palo Alto at this time of morning, and although I thought I'd have a bunch of guest posts waiting in the wings, there is zilch. So I at least wanted to post a comment cleaner to start the week off.
Anyway, it's a quiet morning so far. The Euro's up a little; the ES is up a little; there are no big economic reports coming out. After the close, there are a number of earnings of note, particularly International Business Machines.
I'll certainly have charts to share later. Until then, time to get ready for the day ahead…….