The Silence of the Bears (by Springheel Jack)

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That was an amazing recovery by the bulls yesterday and though 1099
wasn't broken, some very serious technical damage was done to the bear
case for the summer, to the extent that I am on the verge of dumping my
road map to 870 as my primary scenario.

Yesterday morning I described the indicators as mixed, but oil broke up
yesterday, and AUDUSD broke up through a key resistance level , and SPX
broke a key declining resistance level as well, so the indicators and
levels that I watch are looking decidedly less mixed today.

Still on the bear side in my view apart from the main bear patterns are
long bonds, the baltic dry index, and the 13/34 EMA weekly cross, as
well as the still unbroken resistance levels at 1099 SPX (trading hours)
and 1099 ES (after hours).

I've seen quite a few times an 'IHS' building on SPX posted by various
chartists. It is an ugly and unlikely looking pattern to my eye and I
haven't bothered to chart it here. Instead I've charted what I think is a
far more likely candidate IHS building, with the neckline at 1130 SPX
and the head still unfinished. The pattern would have a target at 1250
SPX:

100723 SPX Declining Resistance Failure

That target fits well with the diamond bottom on SPX that Pug posted
yesterday morning with a target at (ahem) 1250 SPX. That pattern broke
up yesterday and Pug's excellent write-up on it is well worth a look here.

In the short term we have a clear rising channel on ES, though we need
another hit of the lower trendline in order to firm up the exact angle
of the rising channel. The channel is unlikely to carry us through 1099
ES today, though as I've marked on the chart below, it is possible,
though not probable IMO, that the upper trendline of the rising channel
is an IHS neckline, with a target in the 1130 area:

100723_ES_60min_Rising_Channel

Of the key indicators and levels that remain bearish this point I am now
expecting the July highs on ES and SPX to be broken, and though there
is some resistance at the 200 SMA at 1113.16, the obvious next target is
the June high at 1131.23 SPX.

If we reach 1131.23 SPX, then the 13/34 EMAs on the weekly chart, which
crossed bearishly last week, may well recross bullishly, turning a
fairly strong bear indicator into a very strong bullish indicator.
Here's an SPX chart showing the last three crosses, including the last
failed bear bear cross in 2006:

100723_SPX_Weekly_13_34_Cross

On 30 year treasuries there was a sharp pullback yesterday off
Wednesday's high for the year, and we are within striking distance of
the rising support trendline at 126'11. That may the the lower trendline
of a rising wedge, and if so I have marked the wedge targets on a
break:

100723_30YrT_Daily_Rising_Support_Trendline

As I mentioned, I am not expecting to see a break of 1099 ES today,
though we could see a break of 1099 SPX. Unless there is a major bear
breakout, I am expecting action to be confined within the ES rising
channel I have posted, and if the lower trendline of that channel were
to be reached today then we could see an intraday move to just under
1070 ES

I'm on a sort of working holiday for the next ten days or so, and I'll
be trying to keep up my daily posts, but I may not manage it every day.

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