On Tuesday last week I put forward a favored scenario for a strong rally that would make a high in the 2115-20 area. The following day I noted the strong daily buy signal that had fixed, and on the Thursday I called the double bottom with a target at 2123. Looking at ES that 2123 target may be made at or near the open today.
Quite a few of you will have read those posts as SPX was testing the 2040s, and those of you that didn’t think that I was having bullish delusions most likely thought that was a credible bearish scenario. Fast forward to today and almost everyone is seeing this as a bullish breakout that will likely result in new highs. That was always a possibility of course, but has anything actually changed in the interim apart from the big rally that I predicted having now happened? I drew the arrows on the daily chart below on Wednesday last week and as you can see, SPX is pretty much where I was expecting then. SPX daily chart:
For the uninitiated, the above is the ETF of the Greek Stock Market (more or less).
Well, she didn’t top-tick it, but over the long haul, she sure came close (tip o’ the paw to Duke of Dubai, who reminded me of this little gem, which I had forgotten about).
The Greek referendum was a clear vote against further austerity and we should see this week whether the ECB bluff that the Greeks have called is in fact a bluff. I suspect it isn’t and that a grexit is now the most likely outcome. If so then I think that’s great news for the Greeks, who can finally default and start rebuilding. It’s a rare country that still has a shrinking economy a couple of years after default. If that’s the way it goes then it would nice for that to be quick, as the constant headlines have become a serious bore.
SPX hasn’t been generous with trendlines since the last high. I do now have a three touch resistance trendline established on Thursday and I’ll be watching to see whether that survives the day. As long as it survives my lean is bearish. SPX 15min chart:
Good Lord, China and Greece – – you just can’t let traders catch any rest, can you?
The list of headlines over this weekend has been worthy of an entire book.
+ Varoufakis resigns (!) in spite of a landslide “No” vote
+ The Chinese government’s unprecedented attempts to shore up their crumbling stock market (including, at the core, directly buying up tens of billions of equities itself) initially causes a massive up-gap across the board, only to be met with so much selling that, broadly speaking, most stocks simply sold off more (I think this is exactly what our own “dip-buyers” here are going to experience, more often than not, for years to come)
+ The energy complex resumes the bear market that it stopped in mid-March (my USO and RSX shorts are particularly pleased) due to what looks like an Iran deal going through soon
The following Monthly chart of EUR/USD Forex pair shows that price has been bouncing (generally) between 1.15 (dotted yellow horizontal line) and 1.08 (solid yellow horizontal line) since February of this year.
At the moment, 1.15 is defined by a confluence of a Fibonacci fanline and a falling trendline…1.08 sits around the lower one-third level of the large price range between the 2000 lows and the 2008 highs.
USD has been in correction since the hysterical March top. The daily chart shows a series of lower highs and lower lows that was interrupted last week when USD failed to make a lower low, Hammered and bounced… right to the EMA and SMA 50’s.
So we remain on watch for a) a higher high or b) a lower low. It’s very simple. As it stands, the near-term is bearish until it proves bullish, not the other way around. That is because the existing trend is down (AROON, bottom Panel).