No Firm Direction Yet

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Yesterday was a tedious day that didn’t go far or decide anything. I’m still leaning bullish but short term ES is retracing after established negative 60min RSI divergence yesterday. I have a small double-top target at 1801.5 and have key support around the weekly pivot at 1796.20. This is the level below which the bear case will start to look interesting again. ES 60min chart:

131210 ES 60min Trendlines and Divergences

In terms of that bear case, in the shorter term the bears have a possible double-top in place now and that would target the 1744 area on a clear break below last week’s (valley) low at 1779.09. 65% of possible double-tops never make it back to the valley low (or trigger level), and of those that do, a significant number fail just after breaking below it. We’ll see. SPX 60min chart:

131210 SPX 60min Possible Double-Top

The key setup for both the overall bull and bear cases here is of course the possible rising channel from the October 2011 lows that was established at the end of November. On the bear case we would now be starting a long retracement or consolidation into a test of channel support, currently in the 1575 area. On the bull case the channel would break up and open up the rising wedge targets in the 1930 and 1965 areas. I’ll be posting this chart regularly until we have a definite break one way or the other. SPX daily chart:

131210 SPX Daily Possible Rising Channel from 1110

On other markets the overall picture on USD looks guardedly bullish, notwithstanding that I now have a pattern target on GBPUSD at 1.97. If the USD uptrend from 2011 is still ongoing I would be looking for USD to now put in the second low of a double-bottom here, with that low above the possible (much larger) double-top valley low at 78.60. USD daily chart:

131210 USD Daily Possible Double Bottom Forming

I mentioned in mid-November that the increasing positive divergence on the CL daily RSI was strongly indicating at least a strong bounce in the near future, and we’ve been seeing that. I also mentioned that if the current falling channel on CL broke up then that bounce might be a major trend change, and the channel broke up last night. We may well see a retracement soon to establish a better rising support trendline and if so that should be a very buyable dip. CL daily chart:

131210 CL Daily Trendlines and Divergences

There has also been increasing positive RSI divergence on the GLD 60min chart and GLD is now rallying as well. GLD has no established declining resistance trendline yet and I am expecting the rally to establish one. I have sketched in the obvious target in the event that that turns out to be falling channel resistance. GLD 60min chart:

131210 GLD 60min Poss Bounce to establish Channel

I’m not expecting to see a retracement below 1796.20 on ES here and am looking first at support in the 1800-2 area, which may well hold. If I see a retracement pattern I’ll post it on twitter. If bears can push below 1796.20 and establish it as resistance I’ll then be dusting off the bear scenarios here and having another look. Until then I’m leaning bullish on the bigger picture.

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