Mind The Gap

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I covered the short term bull case on SPX pretty thoroughly on Sunday, so I won’t cover that ground again today, and here is the link to that post ‘Cave Taurus’.

Since then ES has rallied as high as 1649, breaking up from the double-bottom there with a target in the 1665.25 area. That double-bottom has an equivalent on SPX and if we see that break up in regular trading hours (RTH) then those patterns are both targeting the same area. 50 hour moving average support is now at 1642. ES 60min chart:

130903 ES 60min Double-Bottom

If we are to see a strong rally this week, and I’m treating that as likely but unconfirmed so far, then the first thing that I would be looking for in RTH is is for the very nice declining channel on Dow to break up. If that happens then the obvious targets are the possible IHS neckline in the 15050 area and declining resistance from the high, currently in the 15150-15200 area. Mainly though the break should be important confirmation that we are going to see that rally this week. INDU 60min chart:

130903 INDU 60min Declining Channel

I’ve already shown the very nice quality falling megaphone (aka broadening descending wedge) on COMPQ a couple of times. If we are to see a rally here then then megaphone resistance is in the 3680 area, and on a break up the pattern target is marginally higher at a test of the previous highs in the 3694 area. COMPQ 60min chart:

130903 COMPQ 60min Falling Megaphone

On the Wilshire 5000 the obvious target is at falling wedge resistance in the 17600 area. WLSH 60min chart:

130903 WLSH 60min Falling Wedge

On other markets CL has broken declining resistance from the high overnight. that was a decent three hit trendline and we may well see a decent bounce on CL here. CL 60min chart:

130903 CL 60min Declining Resistance Broken

On ZB the nice long setup I was looking at on Friday has fallen apart on the break of the rising channel there. There is some positive 60min RSI divergence but I as am assuming that this is just a rally within an overall downtrend, and that rally now has no trendline support, a long on bonds here does not look appealing. ZB 60min chart:

130903 ZB 60min Rising Channel Broken

On Gold the rising channel I posted on Friday afternoon has broken which is bearish. Against that though a falling megaphone (aka broadening descending wedge) formed from the current high and has broken up overnight. we may well see a test of the highs and if so, that could well be the second high of a double-top. GC 60min chart:

130903 GC 60min Broken Patterns

GBPUSD has been basing and has two clear H&S options here with the pivotal area at 1.56. The bull option is that an IHS target breaks up towards a target in the 1.578 area, and the bear option is that a larger H&S completes at the 1.542 area neckline and breaks down towards a target at 1.512. I’m leaning bearish on balance here but it could easily go the other way. GBPUSD 60min chart:

130903 GBPUSD 60min HS Patterns

The key on SPX today is the double-bottom with the trigger level at 1646.41. If we see a gap over that at the open then that may well be a breakaway gap and we may well then see a direct move towards the target in the 1665/6 area without a retracement today or any attempt to fill the opening gap. If the open is more uncertain then we may well see at least an attempt to fill the gap and a more two way market today.