I've lightened up a skosh on the bear side; I currently have no large short positions, although I still have a bunch ("bunch" being equal to 168) of short positions.
I have taken on two big long positions – – IWM and FXE as hedges
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It is interesting that silver prices and the iShares Silver Trust (SLV) are up nearly 2% this morning, in sympathy with higher gold and a pullback in the dollar, but perhaps most importantly in sympathy with a sharp upmove in the Shanghai Composite Index (+2%), which suggests strongly that China is not slowing down nearly as much as the financial press would like us to believe and could very well become an increasingly supportive factor for industrial (and precious metals).
Let’s notice that the SLV is pushing up against its near-term resistance line at 18.12, which if hurdled and sustained should trigger a run at its more important May-Aug resistance line, now at 18.43. In that all of the action off of the May 13 high at 19.44 has taken the form of a large coil-type congestion pattern, a sustained upside penetration of 18.43 will argue that the price structure is emerging to the upside from the coil and is in the early stages of a new upleg that has measured upside potential into the $20 area next.
Only a failure to climb above key resistance, followed by a downside violation of last week’s low at 17.43, will damage the developing bullish pattern.
Originally published on MPTrader.com
I'm expecting the week, broadly speaking, to play out as follows. Today
I'm expecting to close up, though that definitely doesn't preclude a
heavy fall in early trading, we may see a retracement downwards
tomorrow, and then I'm expecting to rally from Wednesday into opex. The
strength of that rally will tell us a lot about what comes afterwards,
but increasingly I'm leaning towards seeing a strong fall below last
week's lows next week.
EURUSD held wedge support and may well bounce here to form the right
shoulder on a big H&S pattern indicating to the 1.213 area. If
so, I'd expect a bounce into the 1.30 area to make the shoulder:
AUDUSD bounced at the important 88.5 support level overnight and I'm expecting a bounce back up into the 90 area:
GBPUSD pinocchioed through the wedge support trendline overnight, which
was a signal that the wedge may well break soon, but has regained 1.56
since then and looks likely to bounce here:
Oil reached the lower trendline of the rising channel and has bounced at support there:
So the USD currency pairs and oil are looking cautiously bullish for the
start of the week, which fits in with my expectations so far.
I'm not at all convinced that ES has found a bottom overnight however,
and even though I'm expecting a fairly high degree of inverse
correlation between USD and ES over the next few weeks, that won't
necessarily be the case every day. A number of EWers were looking at a
bounce level at 1069 SPX. We may see that level near the start of
trading today and if it is broken with much confidence then we may fall
to test the next key support level on ES at 1050. This support level
looks very attractive because it marks the neckline on a potential
H&S pattern that would indicate to 970, and in the cold light of
day it looks the obvious target for ES from here unless we see a strong
bounce on ES / SPX from near the open today:
Something that backs that target up is the chart for 30 year treasuries,
which I've been looking at again this morning. These have been flying
up over the last few days, and have made a lot of progress overnight. On
the daily chart I've marked in a rectangle which I posted in mid-May,
and that has a target at 134. In the shorter term I have a rising
channel with a target at 1.35. This move up doesn't look complete to me,
and if it continues to rise strongly towards 135 today, then I could
definitely see equities falling in response, and as I said, 1050 ES
looks like a very strong target if that is the case:
Overall the charts are starting to look very bearish, and we're close to
the point where I may upgrade the bear scenario for the rest of the
summer to being my primary scenario. In the interim buying the dips is
looking increasingly dangerous.
It's still pitch-dark here in Palo Alto, but I'm eager about the week ahead. As I went through all my charts (which I actually did twice this weekend, just to smoke out all possibilities), I was amazed to see how many bearish setups have formed, even with the recent selloff. The market looks exceptionally vulnerable.
Although Mondays have acquired a reputation for Always Being Up, that truism is – as Bernanke might say – unusually uncertain today. Futures have bobbed between being up 6 points to down 6 points since /ES trading opened late Sunday. As I sit here, it certainly doesn't look like the bulls will be off to the races at the opening bell.
I've highlighted the long series of black candles from late in June to illustrate how we seem to have clicked into the same mode again. I'm pretty sure we're going to get close to 1,000 again. The real question is whether we will break it and get to my long-hoped-for 925 level. It's going to take some new news to get us there, and nobody knows what that could be.