Big Inflection Point Week

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Back on the 30th June, with SPX at 1606, I did a weekend post arguing the case for a move to a rising wedge target in the 1965 area. You can see that post here. That target looked ambitious then but as SPX has since risen over 200 points into the likely opening print today, that target no longer looks particularly ambitious. From a pattern perspective the only thing that would negate that target would be if that wedge turned out to be part of a larger pattern, and the only likely pattern would be an overall rising channel from the October 2011 low. There are a couple of possible alternates for that trendline but the ideal and highest trendline target would deliver a perfect rising channel, and that target looks to be in the 1810 area today. Here is that channel on a chart showing the major patterns formed since that October 2011 low. SPX daily chart from October 2011:

131125 SPX Daily Patterns from Oct 2011

SPX close within two points of both the weekly and daily upper bollinger bands on Friday, so I would count that as a close on both bands. In the event that we see a strong week on SPX this week, and that SPX can break above strong trendline resistance in the 1810-12 area, then I have the maximum closing range for the weekly upper bollinger band in the 1815-20 area this week. SPX weekly chart:

131125 SPX Weekly Patterns BBs MAs

I’ve been working a possible rising wedge from 1646 on the SPX 60min chart, but the upper trendline on that was invalidated by the break back above it at the close on Friday, as a rising wedge cannot have both an overthrow and underthrow before breaking up. a possible rising channel was established at the 1777 low, and I have marked in an alternative rising wedge upper trendline with wedge resistance in the 1812 area today. SPX 60min chart:

131125 SPX 60min Pattern Options

I’m pressed for time today so I’ll posted a CL chart on twitter after the open, and the last chart for today’s post is the AAPL chart, where as long as 511.55 holds as support, AAPL would appear to be forming a bull flag here. AAPL 60min chart:

131125 AAPL 60min Consolidation

Are we going to see a big reversal at possible rising channel resistance on the SPX chart? Maybe. There is nice negative RSI divergence on the SPX daily and weekly charts, and SPX is certainly overbought. On the other hand QE is still going full steam and seems likely to continue to do so for a while yet, and history leans towards significant highs in the Spring/Summer rather than just before Xmas. We shall see. Even if those trendlines break however, SPX is very overbought and I’m expecting to see a 4% retracement at the least before the end of 2013. Until that retracement SPX isn’t likely to rise at more than 10-15 points per week on average, so new longs right here or on a break up don’t look very interesting.

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