Slope of Hope Blog Posts
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You can see on the 4-Hour charts below that, from their March high to April low, the YM, ES, NQ & TF are still trading within their Fibonacci retracement zone. All of them are below the 50% level, with YM as the strongest, followed by ES, NQ, and TF, respectively.
The YM and ES have formed an uptrending channel from the low, and price is still trading within it after Thursday's close, although the YM pierced briefly below in Thursday's trading.
The NQ and TF are still trading within a downtrending channel from high to low, although the NQ pierced briefly above in Thursday's action, and the TF is attempting to form an uptrending channel.
I mentioned in my post of April 17th that I'd be looking for a continuation of Tuesday's advance and a hold above its high on any retest before I would assign a "bullish" rating to all four in the short term. Since that hasn't happened, we'll have to see whether we get more choppy sideways movement, or a resumption of the pullback below the low of the Fibonacci retracement, or whether we see price stair-step upwards to break and hold above Tuesday's high, before a new trend is eventually established on a Daily timeframe. I'd re-iterate that should this third scenario play out, I'd like to see high volumes support such a move, particularly on any breakout and hold above April's high, especially with respect to the NQ (for the reasons I explained on April 17th).
Both the Dollar Index (DXY) and the Commodity Index (CRB) are approaching critical technical inflection points. However, it is the position of the CRB (lower chart) that is of most concern.
Let's notice that the CRB has been under pressure for the last three weeks and appears to have decisively violated its 3-year support line en route to a retest of its Q4, 2011 Double Bottom at 292-293. This level must contain forthcoming weakness to avert downside follow-through towards the 250-247 target area, a 15% decline that could reflect a global economic slowdown with deflationary implications.
I keep hearing talk of improving economic conditions in the U.S., but Thursday's data shows a decline in Existing Home Sales, Philly Fed Manufacturing, and the CB Leading Index, as shown on the graphs below. Add to these, Monday's data release showing a further decline in the NAHB Housing Market Index, as shown on the graph below.
Show me evidence, other than the unabated rise in the stock markets since last October, that conditions are actually improving. As I mentioned in my post of April 16th, I'll be keeping a close watch on the U.S., European, and Chinese Financials over the next weeks.
Additionally, Thursday's data release shows a decline, once again, in Europe's Consumer Confidence, as shown on the last graph.
Data released on Thursday showed that Japan's Trade Balance has now slipped to its lowest reading since 2000, as shown on the graph below. This balance has been slipping since its most recent high in early 2011.
There is no way to put lipstick on the pig that is the fact of HUI's failure below important support at the 475-500 zone. But the fact is that the HUI has benefited from a rising yield curve (panel 2) and a declining long term yield (panel 3, AKA our biggest picture of an ongoing deflationary need to correct or 'the Continuum', which is periodically met by policy makers' inflationary actions).
I have slightly mixed feelings this morning, there is definitely a path for equities to move upwards today and ES particularly has very well defined support in the 1377.5 – 1379 area. If that holds today then we may see a push higher that I would be expecting to find resistance in the 1398-1400 SPX area, at the channel resistance on my SPX 15min chart that I posted yesterday morning. That said there is a very bearish look to the overnight action and I'll mainly be looking at that initially. ES will need to break below 1377.50 to trigger that bearish scenario.
On ES there was a marginally higher high overnight on strongly negative 60min RSI divergence. This is a bear setup and there is a possible double-top in play if ES can break below the valley low at 1377.50 with a target at 1364.75. I will mention again that double-tops, like H&S patterns, only become higher probability setups on a break below the neckline or valley low. Until then both patterns are just promising looking lines on a chart: