I have a provisional overall scenario for the next month or two that I'm expecting to play out. Obviously I may be mistaken, but it hangs together fairly well. On equities I think we are in a sideways type wave 4, which will be followed by a wave 5 up that will probably peak at a major pivot, either at 1442 SPX or slightly north of 1500. Given the proximity of 1442 SPX to where we are now there's a better argument for the higher target I think. That should take us into the seasonal high area late April to sometime in May. After that I'm expecting a big correction over the summer and we'll see what the bears can do with that, if any have survived this monster move up.
While that plays out I would expect new rally highs on EURUSD, and a major drop in bonds. As long as USD can hold uptrend support during that time, I then have a hugely bullish overall setup on USD that could see it spike up to over 90 while EURUSD gets crushed over months following.
Short term I'm a bit concerned by the support break on Dow yesterday, but it didn't last long and the recovery was strong. It is a warning signal though, and should we see a more definite break then there will be an argument that we have already made a major interim top:
On SPX yesterday we had a third close down, but again that was followed by a strong rally, so net downside over those three days is still modest. I have a provisional rising channel from the March 7 low established at the low yesterday and I'll be watching to see if that holds. I would draw your attention to the RSI divergences on the 15min RSI on the chart below and that's worth watching, as if this is a sideways wave 4, then we should expect another significant down move after the current up move. We'll see how that develops today:
EURUSD tested rising support from the last low very hard yesterday but it held, and the immediate technical picture remains bullish as long as that is the case. I have a slightly rough rising channel from that low and that needs to hold on an hourly close basis. As long as it does the IHS target is 1.356 and the next obvious target is a retest of the current rally highs in the 1.349 area. The bigger picture on EURUSD looks bearish, and the fundamentals obviously stink, so as and when the current rising channel breaks that may well be the start of a long downtrend. USD and equity cycles often diverge for long period so we may well see a rally top on EURUSD well before a top on equities:
On bonds I'm seeing the current move up as a retest of broken support before a continuation down. This could go as high as 140 but the 139-140 area is strong resistance and ZB is faltering here on increasing negative RSI divergence. There is a very decent support trendline from the last low and I'll be leaning bearish again once that breaks:
I've been concerned about possible weakness in oil since the support trendline from the October low broke last week, and it broke short term support in the 104.5 area yesterday. I have a provisional declining channel and I'd expect a bounce within that channel next. Hard to see where this might end but I'm looking at the strong support levels around 96.5 and 93.8:
I've taken a little time to look at AUDUSD today as a friend requested it, and on the long term monthly chart I think there's a good argument that the top last year was a major top that may last several years. If we should see a break below major support at 0.94 then we may well see a powerful drop that could fall into the 0.68 to 0.70 area, though that's obviously a long long way down from here:
On the short term picture a sort of rising wedge has formed from the October low and AUDUSD tested rising support on that yesterday. Unless that breaks down I'm expecting a rally back up into resistance next. Short term declining channel resistance is in the 1.05 area, and on a break above the wedge resistance target would be 1.087, with declining resistance from the 2011 high slightly below in the 1.0825 area:
I don't have time to show them here but I've been looking for a bottoming pattern to develop on gold and silver here as the PM complex has tested important support, and there are part-formed IHS patterns on both gold and silver which look provisionally bullish. I'll be posting those on twitter when I have time later and my twitter handle is shjack666. I have a twitter related question to ask today and it is this. I use 666 on my email and twitter handle because it was the 2009 low on SPX. Obviously the number has some religious connotations however, and my wife has suggested that I should change this for that reason. Feedback welcome and I have already identified a decent alternative.
The outlook for today is fairly neutral statistically, with a slight downward bias on SPX and Dow, and a slight upward bias on RUT. If SPX can make a short term higher high at the open I'll be looking for a further run up for a few points before another probable move down. into early next week. I'll be watching that SPX 15min chart for a short term high signal. I'll be in and out today.