My sons are out at an annual Teddy Bear's Picnic at their school today,
and I think that might well also be the theme for the market today, as
overnight ES broke range support at 1070.5, and that has opened up the
next range support target below at 1048.40:
I posted a chart in the afternoon yesterday showing the importance of
these ranges in recent trading. So far in this decline we have not seen
ES break down through a range support trendline and then break back up
again. Here's yesterday's chart which makes interesting viewing:
We will get a snapback rally at some point, and it could be today. If we
break back up through 1070.5, then the next target is the top
trendline of the declining channel at 1075. If that breaks then I would
expect a snapback rally with a target in the 1090 area today.
Until that declining channel breaks though, the bears remain in control
here.
After yesterday it isn't that easy to be upbeat on the bull side here.
Vix broke up through declining resistance and another key resistance
level. It didn't get much further, but that was very definitely bearish.
The mystery behind the strange sight yesterday of a rising channel on
EURUSD while ES was in a declining channel looks resolved today, as all
the recent EURUSD moves seem to be part of a larger declining channel.
Again, that looks bearish for equities:
GBPUSD made a new rally high yesterday and is declining back towards the
lower trendline of that rising channel. Less important but bullish for
USD today and therefore bearish for equities:
There is one ray of bullish light that I found, and that was on the
Nasdaq, which has formed a very nice looking falling wedge. Not enough
to go long here yet, but if that strong declining resistance line
breaks, the pattern target would be for a full retracement of this
week's decline:
Definitely a day to be cautious. Key trigger levels for a snapback rally
are:
- ES – Break of 1075 with confidence.
- NQ – Break of 1850 with confidence.
In the absence of such a break up, we may see 1052.5 today. S2 Pivot
support is just under 1052 and range support is at 1048.5.
