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The interesting aspect to the enclosed 15 minute chart of the ProShares UltraShort S&P 500 ETF (NYSE: SDS) is that off of the recent double bottom lows at 25.35/36, the SDS rallies have undergone very "disciplined" pullbacks that have preserved the prior near-term breakout levels. Those levels, which are prior resistance and now support, are at 25.70/80 and then 26.30/20.
This is the sign of a move that is developing directional strength and confidence. At this juncture, the series of higher-highs, and higher-lows during the past few days remains the dominant feature of the extreme near-term price action. As long as the profile remains intact, the SDS pattern deserves the benefit of the doubt on the upside. However, a sustained break of 26.15 will put the developing SDS uptrend into doubt.
As I'm trying to get a real post ready, I'll stall you with the following: this is probably the funniest roast clip I've ever seen, and it contains two childhood heroes of mine – Kirk and Sulu (in real life, however). Consider this rated-R, so don't watch it if you'll get hollered at or don't like it blue.
I'm not leaning towards a very deep retracement right here. My feeling is that we will rise this week, make a new high on SPX, and then start a deeper correction that will take us back towards 1150. I might well be mistaken however.
We are seeing real weakness on SPX after last week, and at the least the topping process looks well advanced. On SPX the rising channel from the August low was broken with conviction on Friday and wedge support from 1085 was tested:
The picture on ES looks even clearer, with that wedge support trendline tested on Friday and retested overnight. It has held so far:
Short term, ES is still in a declining channel from the high which is offering some very nice short and long entries and exits while it lasts. There are a couple of things to add to that here though. Firstly there is strong support at the Thursday overnight low at 1193. That has been tested twice since on Friday and overnight but the level has held on an hourly basis, and is the key initial support level if ES is to decline further. It is made even stronger by the fact that to break it with confidence the lower wedge trendline from 1085 would also have to be broken. With that caveat in mind, declining channel support is currently at 1188, and resistance is at 1204.5. Both levels are steadily declining of course as long as the channel holds:
On the bigger picture we are still obviously some distance above EURUSD wedge support in the 1.32 area, and other USD currency pairs look ready to fall further as well. AUDUSD has an obvious target in the 95 area, which would also be close to a retest of the broken broadening formation at 94:
I posted the XLF chart last week showing that it had bounced twice at the top of the broken rectangle. I wondered aloud then whether that support might break and open up a retest of the broken declining channel upper trendline just under 14.7, and we saw that support break on Friday. More downside looks likely but if it makes that retest XLF will look very interesting as a speculative long:
It is options expiry week this week of course and that is not generally a week for steep declines. I'll be watching for a break up from the ES declining channel, which would be a good short term long entry if we see that today.
Leisa here: I was unable to get a sector report post out. I'm going to piggyback on SHJ's post and give you the download link if you are interested. Here's the graphic and the report here.