Daily Archives: August 20, 2010

Shanghai-SPX Comparison (Mike Paulenoff)

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Instead of breaking out to the upside above 2700 today, the Shanghai Composite instead rolled over into a bout of profit- taking (-1.8%). That said, however, let's notice that the weakness has not violated any meaningful technical levels, which are clustered in the 2593/90 area, and again down at 256.00. A downside sustained breach of 2564 — the prior pullback low — will indicate that the Jul 2-Aug 19 upleg is complete, and that a significant correction is in progress that could press the index back to 2500-2470, or even revisit the July low area at 2400-2320.

Right now, the most bullish scenario calls for a bit more weakness into the 2600 area followed by an upside reversal that initiates a new upleg. A climb that sustains above 2700 is needed to trigger upside acceleration. The $64K question is whether the SH COMP is leading the SPX or vice-versa? Let's notice that the SPX weakness today further diverges from the technically stronger SH COMP. I will be very interested to see if the China market can hold up despite the SPX weakness, which will further convince me that we are witnessing a major transition in equity-business-economic hegemony to the East from the West.

XFoqzfsXa
Originally published on MPTrader.com.

Trimming Here and There

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I have spent most of the day (a) tightening stops or, where appropriate (b) covering shorts. I have reduced my holdings from 275 positions to 224, and my portfolio exposure has been reduced from 180% to 143%. My largest short position is TLT, which is doing pretty well so far. I’m probably going to scout around for an ETF or two to round the portfolio out before the weekend is upon us. As I am typing this, my completely-short portfolio is up 0.84% versus the QQQQs which are actually up a little bit, so I am very pleased with my relative performance today.

0820-barber

ES and EURUSD Break Support (by Springheel Jack)

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I was looking for confirmation that a major decline might be starting
yesterday and I got it when ES broke the rising channel. Looking at SPX
the channel was broken even more convincingly and just to underline the
point the 13/34 daily EMAs recrossed bearishly, backing up the 13/34
weekly EMAs which recrossed bearishly last week:

100820 SPX Daily 6month

EURUSD didn't break the broadening ascending wedge yesterday but has
dropped well below it overnight, and has also dropped through the
neckline of the big H&S pattern indicating to 1.214. Short of a
really major recovery today I'm regarding the EURUSD wedge as broken,
and that is confirmation once we see the close today that we are likely
to see new 2010 lows on both ES and EURUSD:

100820_EURUSD_Daily_Broken_Wedge_and_HS_Pattern

Where we are on EURUSD is of enormous importance in my view as it is
the key inverse proxy for USD. I've posted before on the complex
relationship for the positive correlation between EURUSD and ES/SPX, and
that the moves down on ES move furthest and fastest when both ES and
EURUSD are both in powerful waves down, as they were between the SPX top
in April and the early June, during which time ES fell just over 180
points on a peak to trough basis. I think it is now likely that we are
in another such period now.

I have put a tentative EW labelling on the EURUSD moves down from the
top so far. On my primary count wave 1 completed at the June low, and
the recent high was the top of wave 2, putting us in wave (iii) of 3
now. On my alternate count we just completed wave (iv), which retraced
almost exactly 50% of wave (iii), and have just started wave (v) of 1.
EW pedants should forgive my not using the standard labelling, but I
think the meaning is clear enough, and either way new 2010 lows from
here now look likely:

100820_EURUSD_Daily_EW_Count

Looking at the SPX daily chart I have also found a simply
beautiful declining channel from the April high to support this overall
picture. Looking at it now it is a perfect technical declining channel
from the top, and should define the target for the current swing down,
subject of course to the time taken to complete it:

100820 SPX Daily Big Bear Picture

On the basis of that channel and the current situation on EURUSD, and
assuming that we don't see a major reversal on EURUSD taking it back
into the broadening ascending wedge by the close today, I am therefore
seeing the next major swing low in the 940 SPX area in mid-September. We
shall see if I'm right over the next three weeks. :-)

In the shorter term I also have a smaller declining channel on ES for
the current move, and also a largish potential H&S pattern
indicating to the 975 area. These give us the two most likely bounce
levels for the immediate move down, and they are the 1050 ES area to
finish the head on the potential H&S pattern, and the powerful
support level at 1037 ES, which would be the declining channel target
and also the neckline for the big H&S pattern on ES / SPX that
indicates to the 870 area. I'm favoring the lower target:

100820_ES_60min_Declining_Channel_and_Poss_HS_Pattern

So there we are. I have put my bear suit back on and am once again
targeting 870 SPX as the most likely main target for this move down, as
it is the target for the big SPX H&S, the broadening formation,
and also the bearish gartley pattern that I posted yesterday, as well as
being the key support / resistance level for the October 2008 to July
2009 period. I am hoping that we will get a second Hindenburg omen in
the next few days just to add the final touch to the overall technical
picture here, which in my view hasn't looked as bearish since August
2008.

Ursine Progress

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No late start for me this morning; I've been too excited about what the day holds, and I've been grabbing my iPad from the side of the bed through the night to watch the /ES inch lower.

There are a couple of pieces of good news for the bears. First off, the upward trend in EUR has been busted; the notion of an IHS pattern pushing the EUR to 1.31 is off the table.

0820-eur

Second, the first of the three levels I mentioned in my video last night has been broken on the /ES. It's a relatively minor step, but a step nonetheless.

0820-es 

  

I suspect I'll my supplementing some of my better positions today. Good luck to all Slopers.