Originally published on TheTechTrader.com.
Slope of Hope Blog Posts
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Back on Jan 20th I posted a blog that compared the topping action to the then current conditions of the SPY (see Jan 20th blog). What started my thinking on Jan 20th was the possible "shot across the bow" that often are evident at the start of a topping process.
After the first shot across the bow in April, the market grinded higher … I pointed this out and posted the following chart:
Well, Fed Day is behind us, and that's a good thing. I hate all the noise it causes. Its biggest effect today seems to have been to push the $VIX to ever-lower levels.
I've been working on my latest book (in case you haven't heard, I've written a bunch of 'em, including this one I mention from time to time about ProphetCharts), and last night I finished my chapter on the ascending wedge pattern. I was struck by the SPY graph and the fact that it sports two gorgeous ascending wedges, one of which was gloriously pierced last Spring (ahhh, those were the days, weren't they?) Of course, it was a POMO-free market, so it actually had a chance to go down before Bernanke could shove his index finger into that dyke.
Anyway, the similarities of these moves is pretty obvious. The problem is that the wedge hasn't been broken yet. If and when it ever does, I will definitely make a lot of noise about it here.
This is shaping up to be a very important and a very interesting day for the precious metals and the mining names. With oil inventories putting pressure on U.S. oil prices in general, it remains to be seen if oil's impact presses other commodity prices lower — in particular, the precious metals.
If the mining issues remain bid, and buoyant today, then we could come to the conclusion that they are following the equity market lead, rather than the weakness in commodities. Right now, my technical work argues in favor of price stability followed by potent recovery rallies in Barrick Gold (ABX) and Silver Wheaton (SLW).
As for the commodities themselves, looking at the daily charts in the precious metal's ETFs from last night's close, a sustained up-day today will indicate that at the very least the corrective leg from the January 3 high at $30.44 in the iShares Silver Trust (SLV) and from the December 7 high at $139.81 in the SPDR Gold Shares (GLD) is over, and that a recovery rally period already is in progress. With that said, it is imperative that Tuesday's lows at $26.03 and $129.07 remain intact and viable.
Originally published on MPTrader.com.
Some of the more enticingly weak charts I've been finding lately have been of old-school companies with decades of history that are, to be blunt, past their prime. In each of the examples below – Eastman Kodak (the former film giant) and Xerox (the former copier giant), they had a go at some kind of breakout (tinted in magenta) but, once it dawned on the investing world that these firms were not about to undergo some kind of corporate renaissance, they sold off again hard. I came into the day short XRX but covered as it got close to its supporting trendline (it could fall much further, but I am being terribly cautious today).
I really can't stand FOMC days. I feel like I'm walking down a dark alley in a really bad neighborhood, and some bearded, professorial-looking guy with a briefcase is about to leap out of a crevice and mug me.
I am thus pretty light today, having no large positions of any kind, but a wide variety of small ones. I note with interest that the Russell 2000 – – more specifically, the IWM – – was poised to claw its way back to the underbelly of its trendline, and it seemed to do just that earlier today.
This is my "line in the sand" with respect to the small caps. Piercing this level would negate a pretty long-term trendline and – incredibly – represent a new recovery high. But it hasn't happened yet, and it might not happen.
What we do know is that even though the Fed has absolutely nothing to say (except for the paragraph that I helpfully provided yesterday………was I right about the SOTU, or what?), the entire world will do its utterly predictable heart attack routine at 2:15 EST and will read volumes about the future of the economy with every semi-colon and hyphen in the announcement.
It'll be nice when it's out of the way. Note that I'm going to be on the quiet side today since I'll be dealing with this nonsense.
NQ closed just over the rectangle yesterday and has kept on moving up overnight. I'm expecting more upside and I have pattern targets of 2333 (rectangle) and (2339) falling wedge on NQ. If NQ was to reach the upper trendline of the broadening top that would require a move to 2400 which looks a very long shot from here and seems unlikely because ES would have to break the main rising wedge on the daily chart:
ES is now close to a new high, and is therefore considerably outperforming NQ of course, as well as many other lead indicator markets such as EEM. ES looks likely to make a new high today and I'm looking for a move to the 1310-1315 SPX level for SPX to touch the top of the rising wedge on the daily chart if SPX makes a new high today
EURUSD followed the support break yesterday with a new high. It has been a widow-maker for shorts recently. Oil also broke support on the five month rising channel, but is now bouncing. In the short term there's a steep falling wedge on oil that has broken up since I did the chart below. Short-term, that's therefore looking bullish, and should bounce a bit here. It's worth noting that the rising wedge target is for a return to the recent high, but there's strong resistance in the 88.3-88.5 area, and I'd expect this bounce to fail there:
I've been looking at gold and silver this morning, and a bounce here for both seems likely. Both have reached significant support levels and have touched support trendlines yesterday. On silver I have a very nice declining channel and two possible H&S patterns forming. We reached the neckline for the first of those possible H&S patterns yesterday:
On gold I have a falling wedge since the most recent high and it looks likely to bounce from the lower trendline which was hit yesterday. It didn't quite make it to my neckline target of 1315 and might yet do that before bouncing. I've sketched in a potential path if the H&S continues to form and then plays out.:
I'm definitely leaning long today. A gap fill looks possible, but after that I'm expecting equities to go up. If ES breaks below 1284 or NQ breaks below 2290 then the short-term bull scenario would look much weaker.