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.

Looking Interesting (by Springheel Jack)

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I've been away for a few days and on my return things are starting to look a bit more interesting on the bear side. I'm not really expecting to see a significant top before February, but there are some serious signs of weakness appearing now and we could top earlier. The key thing on SPX short term is to see whether the rising channel for the last month can be broken. That's best seen on the SPX 15min chart and I'm expecting to see at least a hit of the lower channel trendline today:

The spike in silver last week left me feeling bullish on equities short term then so it's very interesting to see that silver is now showing real signs of weakness.  Silver tested the support trendline from $18 yesterday and I think that there is a very real chance that it will break. Silver has hit the obvious long term resistance trendline now and a break of shorter term support here should signal a serious correction. Here's the one year view:

I was very disappointed to see copper break up through long term resistance last week but shorter term resistance slightly above has held and copper may well also have made a significant interim top:

I posted the Vix weekly chart a couple of times in December to show the key support trendline being hit. Vix has bounced a bit since then and I'm not expecting to see that support trendline broken anytime soon:

I also posted the TLT falling wedge in December. As I expected, the upper trendline of the wedge was hit and we've seen a nice reversal from there. I'm in two minds about where TLT goes from here though. A move to the lower trendline of the wedge would require a major break of long term resistance on bond yields, which would in my view confirm that the thirty year bull market in bonds has finished. I'd like to see that but it may well be that the TLT falling wedge will break instead, which would then be a decent long entry if that happens:

I'm expecting to see a topping process start in earnest soon and it looks as though it may well have started already. I'm leaning short today and I think we could see significant further weakness this week. Regardless I'm not now expecting to see a lot more upside on equities before the next major interim top is made.

Do Fibs Lie?

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The very long-term Fibonacci fans that I follow on the S&P 500 index show we're getting awfully toppy here. Take a look at how the prices were supported back in 2006/2007 (green circles) by these fan lines. Once it broke the line, it tried to recover (the leftmost red circle), but then all hell broke loose (feel free to take a moment to wipe a tear away at those joyous days).

After a long fall, the market surged up to its recovery high in late April 2010 (red circle), fell some, and then rallied back yet again to a new recovery high. There's still a little room between current prices and the fan line, but I thought this was an important chart to point out, even if it's a week or two early.

Please. Accept the mystery.

0103-spx

A Comparison to Consider

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Let me preface this by saying that my bear mojo has been almost completely drained from my veins at this point. The best positions I have are all long ones, and after 20+ months of hearing (and repeating) Why The Drop Is Going To Start Now, I'm getting close to just focusing on the long side. Call it capitulation if you like; I think I'm past caring.

Having said that, I humbly offer up this interesting comparison between the market top in 2008:

1202-one

……..and our present market……

1202-two
If we get a rally tomorrow (and the jobs report, I suppose, will decide that), the above is rendered moot.

I once again want to thank the gracious contributors to Slope – – – both those who create posts and those who comment. You guys and gals are the heart and soul of this community, and I am more grateful to you than I can express. This is a special place, and I thank you for making it so.

Good night.

Technical Tug Of War (by Springheel Jack)

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Well resistance was well and truly broken yesterday, and both ES and NQ made short term higher highs after higher lows. For my money the Santa rally is on and the question now is mainly about how far that will go.

Short term I'm looking for some retracement today, though there are some very bullish patterns in play and there is a risk that ES might spike up to 1220 or higher today if they play out. On ES I have a tentative rising channel with the upper trendline hit yesterday and again at a higher level overnight. The bull pattern here is obviously the bull flag indicating to 1222+, and I wasn't happy to see that breaking up this morning. However ES has since given up those gains and the higher high was on declining RSI so I'm still thinking a retracement looks likely. NQ made a lower high overnight which was also encouraging. If ES falls back to break 1200 then I'm expecting a return to channel support in the 1188 – 90 area,which I'd be regarding as a good buying opportunity:

The other bull pattern that I've been looking at this morning is the IHS that has formed within the EURUSD declining channel. The neckline hasn't been broken on an hourly basis yet but if it is then the pattern indicates to declining resistance in the 1.34 area, and I'd expect to see that made, as IHSes formed at a channel trendline tend to be very good performers. If that happens we might well see ES testing the recent highs by the end of the week:

I haven't much to add to that in the short term, so I've some other interesting charts to share this morning. The first is my chart of the bull market since March 2009, which has been a move of simple technical beauty. The recent highs and lows on SPX fit very well within the established internal support / resistance internal trendlines and it would suggest a target for this December rally in the 1250 area, unless of course it breaks up through into the next range:

The next chart is the long term copper chart, where we are just under massive long term resistance. A weekly close above $405 would look very bullish but right here just under $400 this looks a very courageous long:

I've been watching the recent meltdown in bonds with interest and found a nice broadening descending wedge on the TLT 60min chart that looks very tradeable:

US Dollar Hits Retracement Target (by Springheel Jack)

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I've been posting about the likely USD bounce for a couple of weeks, and yesterday we hit the target for the retracement, if indeed it is just a retracement, when $USD hit the upper trendline of the declining channel:

Any higher than this in my view and we're looking at a major bullish breakout on USD, with my next pattern target over 85. It's a bit hard to see that happening with the Fed seemingly so committed to devaluation but that's my line in the sand, and in any case we should expect USD to pull back a bit from this key resistance level in the short term.

I've been looking for a lower target on EURUSD so I looked again at the chart after USD hit target yesterday and saw that EURUSD has hit the right reversal level for a rising channel on EURUSD, rather than the possible broadening wedge I had been looking at. If that rising channel holds then the next upside target is in the 1.45 to 1.50 area, so this is an interesting level for a spec long with a stop below the lower channel trendline:

What USD does here has big implications for equities. If USD reverses from resistance and resumes its swan dive downwards, then in all probability we are seeing the end of the current SPX retracement, and the start of a fresh wave up on equities. If USD breaks resistance and heads higher, then we should see a lot more downside on equities and commodities, and the big move up from July, which has piggybacked heavily on the declining dollar, is most likely over. I'm expecting a USD reversal back down here, but I'm keeping an open mind in case it goes the other way.

A lot of charts hit key retracement targets yesterday. One that I've posted here a couple of times recently is XLF, where the broken declining channel upper trendline was retested yesterday. There are many other charts that look like this, and if USD does reverse here, that's why yesterday looks like a significant swing low:

In the short term on equities, the declining channels that I posted on SPX and Nasdaq yesterday have turned out to be broadening descending wedges. There's a similar wedge on Dow as well. Here's the wedge on the Nasdaq 15min chart:

Here's the wedge on the SPX 15min chart:

I'm expecting a bounce today. That could be the start of a fresh wave up and if so, the declining resistance trendlines that are the upper trendlines of these wedges will break up. That would be a strong long signal. If we reach those upper wedge trendlines today then resistance will be in the 1197.5 area for SPX and the 2122 area on Nasdaq.

Regardless of whether we break up from these patterns there is most likely one and perhaps two excellent entries there. The first is the short from declining resistance. Shorting declining patterns is always a nice trade as stops can be tight and within a short time your stop can be below your entry level. Going long is a lot chancier as there's always a significant risk of a second lower trendline hit further down. The possible second good entry is if those resistance levels are broken, as that would be a good entry level for the further upside that would then be extremely likely.