With oil pushing higher (finally), DBC seems to be getting some strength and, as cheap as it looks, appears like a good buy. I’m not so sure. Just take a look at each of those little red lines I’ve drawn. In each case, one could have argued that commodities were forming a base and were ready to reverse, and each time, the tumble simply resumed. The modest pause we’ve seen in prices plunging isn’t a justification to fight the overall trend.
SPX broke down hard yesterday and closed near the lows, giving bears their first complete day in a while. SPX broke back below the daily middle band and, as long as we don’t see a daily close back above it, the next obvious targets are the daily lower band at 1985 and the 50 DMA at 1976. The band pinch here means that it is very likely that SPX will start an extended band ride in the near future. The bulls had a shot at starting an upper band ride last week and couldn’t sustain it. If bears can get SPX to the lower band then they get a shot at starting a lower band ride instead. SPX daily chart:
This is my vacation post for other (non-equities) markets. For equities check my last post from earlier today. Normal service resumes next Monday 4th August.
Last time I was looking at EURUSD I said that I was expecting a test of rising wedge support in the 1.35 area. EURUSD made that and then slightly lower to test the 200 DMA, so the rising wedge is now broken. Unless we see a fairly fast recovery to new highs I’m now looking at targets for EURUSD in the mid-120s. I’ve been watching this setup for months in the expectation that there should be a strong USD rally at the end of QE3 so I’m expecting this to resolve down. EURUSD weekly chart:
It feels good to be back posting on Tim’s blog again. I will try to throw one or two posts up a week going forward.
Right now we are all on top watch, but even though the taper is in full swing, and POMO is only going to be three days a week in July, the charts sure don’t look like a top to me. Both SPY and QQQ’s went back in buy mode for me this week, so I don’t feel like being a hero trying to catch a reversal, but looking to follow what the market is starting to recognize, and buy; basic materials. (more…)