Meanwhile though, huge technical damage was done last week on SPX and other indices. The main SPX rising support channel was broken on Thursday on a closing basis, and then the rising wedge on SPX was also broken on Friday on a closing basis. The potential H&S pattern on SPX that I suggested as a possible downswing target two weeks ago has now formed the head and if this is to continue to form, then I would expect to see SPX trading in the 1120 to 1170 range for a few weeks before it plays out to a target in the 900 area:
DX broke up through the upper trendline of my rising channel, but not by a lot or for long, and has since reversed and fallen halfway back to the bottom of the channel. We'll see whether it makes it all the way to the other side. I'm seeing mixed signals which I'll come to next:
On the bullish side, GBPUSD has made an amazing recovery since last week, and I watched with some incredulity as a large IHS finished forming overnight and broke the neckline. We'll see if it plays out:
On the bear side though, I also watched a rising wedge form during the powerful EURUSD recovery. The lower trendline has broken and this too could play out. This is more doubtful though, as rising wedges frequently just turn out to have been the upper half of a previously unrevealed rising channel. Looking at EURUSD now, if that is the case, then it has bounced where I would expect in the 1.287 area:
Oddly oil has not yet reached my downside target, even with all the drama last week. Perhaps it will decline a little further to hit it:
Overall we have a very bullish picture at the beginning of this week, and given that opening gaps outside the previous day's range generally go further in the direction of the gap, then we will probably see further rises today.
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