One of the first things that I mentioned on Friday morning was that it was important for bears to deliver a conviction break below the weekly middle band at 2014 to open up the next targets below. With the open at 1992 that didn’t look that hard but the close at 2019 failed to deliver that important support break. SPX weekly chart:
With all the hype and noise built in to daily and weekly market management, sometimes it is worthwhile to dial out, calm things down and touch base with markets on the big picture. Here are views on various markets (with limited commentary) by way of some NFTRH monthly charts.
Let’s start with currencies, since they are a reflection upon global policy making, which has been unprecedented in its direct market interference over the last few years.
Nominal Charts – Currency
We noted the hot air patch in the Canada dollar last year. I had thought CDW might stop and find support at 85, which is a measurement from the topping pattern; but so far, no dice.
The bulls had a very bad day yesterday, and on the daily chart there was a conviction break below the 50 DMA and the middle band, as well as breaks of lesser support at the 100 DMA and already broken rising wedge support. Generally speaking after a break of this kind I’d be looking for a touch of the daily lower band before another break back over the middle band, and if we are to see that then that is currently at 1975, just above the December low (and double top support) at 1972. SPX daily chart:
SPX did an impressive breakaway gap up yesterday and almost made it to my IHS target at 2067. I have further targets in the 2084-6 area from the falling megaphone that broke up on Wednesday and the rising wedge from the low. SPX 15min chart:
Another day of selling yesterday, and SPX has lost over 2% over the first three trading days of 2015. This is fairly rare, having only happened eight times in the last 44 years, and it puts SPX on the clock for a possible rarer setup that would make the prospects for the remainder of the year look bleak.
Of those eight examples, three managed to close January above the close on that third day, which in this case would be 2002.61. Those three examples all put in excellent years, with the lowest rising 14.75% and the other two rising slightly over 26%. That is the SPX ‘get out of jail free card’ option.
Of the five others that closed January below the close on the third day, the best two full year performances were 1% and 3% gains, the next two lost 10% and 11% on the year, and the last lost an impressive 39% on the year (2008). If January closes below 2002.61, the historical stats would therefore suggest that the likely best case scenario would be a flat year. (more…)
As I suggested in my post yesterday, a weak open snowballed into a bigger move down and my target rising wedge support trendline was almost touched at the low yesterday afternoon. That should be hit today or tomorrow though we might see a bounce first to establish a double bottom. I’m expecting wedge support to hold or to be broken only slightly, but if we see a conviction break then it’s well worth noting that there is a double top setup here that would target the 1851 area on a break below December’s low at 1972. SPX 60min chart: