Slope of Hope Blog Posts

Slope initially began as a blog, so this is where most of the website’s content resides. Here we have tens of thousands of posts dating back over a decade. These are listed in reverse chronological order. Click on any category icon below to see posts tagged with that particular subject, or click on a word in the category cloud on the right side of the screen for more specific choices.

No Decent Topping Setup Yet (by Springheel Jack)

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Some of you might be wondering why I'm still looking for a higher high on SPX here. The answer is simple. Without at least a hit of 1430, and ideally 1435-45, we don't yet have a decent test of the 1440 area SPX pivot, and that makes any high here look like a short term swing high before continuation upwards. I'm looking for something more definite. We also don't yet have a decent short term topping pattern, generally an H&S, or a double or M top, to signal the high and deliver downside targets. That higher high might deliver both. 

However we are where we are, and ES / SPX could go either way short term. On ES I have declining resistance in the 1412 area, and a break below would open up a test of the highs. A break below last week's low in the 1395 area would suggest a run at rising channel support in the 1368 area:

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Bearishly Bullish (by Springheel Jack)

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I was asked yesterday why I'm thinking the 1440 SPX area might well be a major high rather than a retracement on the road to test the 2007 highs. From a TA perspective both are definitely valid options, and I would go so far as to say that in all likelihood we will do one or the other. I covered both options in my weekend post before last and you can see that post here. 

There are a few technical reasons why I'm leaning towards thinking this is a major double-top being formed and they are as follows:

1. There are major topping patterns formed and very much still in play on copper, EEM and many other indices. These need to be borne in mind and make downside risk here unusually high.
2. SPX highs tend to be at tests of important previous support or resistance levels, and the April 2012 high wasn't. This has me thinking that the April high was part of a topping pattern rather than a significant interim high in its own right. 
3. The huge Dow Theory divergence between Dow and TRAN here is characteristic of major tops.
4. There is a very nice setup of negative RSI divergence on the weekly chart, and there is also a decent resistance trendline that is a few points above the 1440 area SPX pivot

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Topping is a Process (by Springheel Jack)

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I posted the SPX chart below in my MarketShadows post at the weekend and I'll post it again this morning. You can see that full post here. It shows the very ambiguous close on Friday at the retest of broken support and at resistance on the declining channel from the high. I sketched in two topping options if we see a break up from there this morning, and they are that SPX has made the first high and valley low of a double or M top, or that SPX has put in the left shoulder of an H&S pattern. Either of those would obviously allow the current high to be tested or exceeded:

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Gold Breaks Up (by Springheel Jack)

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The downtrend continued yesterday, and on the SPX daily chart the middle bollinger band was tested. If this is just a retracement, or the decline so far has been the first part of a topping pattern, then this is the obvious bounce level. On a break below here, rising channel support, the lower bollinger band and the 50 DMA are in the 1365-70 area and that would be the obvious next target:

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Ms and Ws (by Springheel Jack)

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There were a couple of developments yesterday that could be very important game-changers. The first from the Fed minutes is serious talk of implementing QE3 if the US economy continues to weaken, which seems likely. QE1 and QE2 both had a big impact on the equity and other markets and there's no reason to think that QE3 wouldn't have a big impact too. 

The second was that the German representative on the ECB came out against the Bundesbank in favor of a European QE program that would buy up the bonds of troubled sovereigns as soon as the yields reached certain trigger thresholds. 

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