Wild Thing

Looking at equities over the last few months, I'm sure the same question occurs to many of us. Can anything stop this wild thing from rising before QE2 finally finishes in June? That's a good question, and no-one knows the answer to that for sure. What we do know though is that there is a solid resistance trendline on SPX that has held so far since this moon shot started in late August, and that we're now just below it again. Until that trendline breaks it has to be regarded as the rising ceiling on SPX, and there is increasing negative divergence on the daily RSI that is suggesting that it shouldn't be broken now:

Looking around the other indices the Transports index is still a long way from confirming the recent highs on Dow:

The SPX is leading now, with Nasdaq and the Russell 2000 trailing behind.On IWM (Russell 2000) the broken support trendline has been acting as effective resistance:

One chart that sprang to the eye this morning as I was browsing through my indicator charts was the weekly chart for the Baltic Dry Index, which is in a very ugly place, and looks as though it might soon test the crash lows. The divergence between the BDI and the Transports index is very glaring. Interesting, though I don't think that it tells us a lot other than to say that over-ordering of new ships near the top of the last bubble has led to massive overcapacity now. Still, shippers with low debt might be an interesting long here:

There's not a lot in terms of interesting short term patterns this morning. NQ broke the broadening descending wedge on Friday and made the pattern target overnight, oil may be forming an H&S to resume the decline that was firmly established before the riots in Egypt the Friday before last, and obviously we're just below resistance on a number of indices. The most interesting thing I'm looking at this morning is on AUDUSD, where a serious support break is in progress, and we could well see a 200 pip drop to the support trendline within the current broadening ascending wedge:

Mondays have been very bullish lately and I'm doubtful about seeing any significant downside today. Unless we see resistance break on SPX however, I'm leaning bearish for this week.