Failing To Bounce (by Springheel Jack)

By -

ES fell to my first candidate H&S neckline yesterday and bounced there. That bounce hasn't been sustained so far, and I'm doubtful now about seeing much of a bounce today, though the positive divergence on the 60min RSI and CCI still looks promising. The small bounce that we have seen has has formed a stumpy right shoulder onto the potential H&S and on a conviction break of yesterday's low I'd been inclined to take it seriously if only because the next obvious targets are in the mid-1250s in any case:

There are two reasons why the mid-1250s are the next obvious downside target. The first is that the lower trendline of the big rising wedge on the ES daily chart is in the 1254 to 1256 area. The second is of course that there is a second candidate neckline for a possible big H&S located there at 1257. If that were to continue forming it would indicate to 1228 with the RS forming on a bounce from the 1257 area to about 1275. I've not marked that on this chart but it's worth bearing in mind:

There is one other downside target worth mentioning, and that's in the 1270 SPX (1267 ES) area. That's the daily 20 SMA, which is usually touched regularly on retracements but hasn't been touched since the start of December:

Nasdaq has  also been failing to bounce overnight and if we see a further move down today the obvious target is the lower trendline of the megaphone in the 2260-5 area:

I've been reading a lot about the EURUSD break up through resistance this week and the general view seems to be that it will rise further in the near future. That could be right of course, but I'm leaning towards the view that EURUSD has made a short term top and will retrace to the 1.32 area. I have two main reasons for thinking that, and I could be wrong, but they are as follows. Firstly EURUSD has broken down yesterday from a rising wedge which appears to be a wave 5 ending diagonal. I've marked a wave count on the chart and the rising wedge target is 1.325. Secondly I have a nice looking, though still unproven, rising channel with the lower trendline in the 1.32 area. EURUSD has recovered most of yesterday's losses overnight and we'll have to see whether it can make a new high from here. I hope not, as a retracement on equities will be much easier going with a falling Euro:

I'd expected to be leaning long today but after looking at the charts this morning I'm still leaning short. There's a good chance we'll break 1260 ES today in my view. If so we should bounce at one of the targets not far below it.