Business As Usual

Most mornings I have a quick browse through the blogs of my favorite chartists and analysts but I was in a rush yesterday and didn't manage to do my usual rounds, so I missed Cobra's warning that after Monday's bearish engulfing candlestick on the SPX daily chart, yesterday was statistically 90% likely to close up. Nice call from Cobra on his 03/28/2011 Market Recap.

Cobra still thinks that we'll make a new low on SPX with positive divergence on the daily RSI, but I'm very doubtful about that, as barring a new high on SPX, there's not much left to confirm that we're in a new wave up in my view. It's disappointing that we didn't see that lower low with positive divergence, but it only happens about two times out of three, and so it isn't unusual not to see it. Cobra makes the point that the rise in the last nine days has failed to exceed the decline in the previous nine days, and so looks corrective, and he could still be right of course, but strong support has now been established at yesterday's ES low at 1300 and as long as that holds I'm not expecting a lower low.

I posted four reasons to now be bullish on SPX last night in various places, and they are as follows:

• The low today was at the SPX daily 50 SMA 
• Declining resistance had already been broken on SPX, today saw a perfect retest 
• 13/34 daily bull cross on SPX, first since September 
• April has been the best performing month on the Dow on average since 1950 

These are all good reasons to be bullish, and as long as 1300 holds on ES, I'm taking the view that we're back to bullish business as usual, with buying every dip being the order of the day. Here's the updated SPX daily chart with all of the various MAs and EMAs I watch on the daily shoehorned onto it. The 13 and 34 EMAs are in thin dotted lines to distinguish them from the others:

Browsing through the other main indices this morning the Transports chart springs to the eye for a couple of reasons. Firstly there is a perfect rising channel on it as with SPX, and secondly on the daily chart there was a lower low with positive RSI divergence. TRAN has been stronger in this correction than SPX or NDX, so we're likely to see a new high there before the others:

The Vix has already given up most of the gains made since the correction started, but hasn't yet managed to fill the gap at 16.88. I'll be looking for that to fill over the next few days and will see a move below it as additional bull wave confirmation:

I understand that yesterday was a trend day up in the end so we're likely to see a day or two of retracement or consolidation here. Strong support has now been established at 1300 on ES, which is also close to the 50 SMA on the daily chart. There's also decent support established at 1315, and that would be an obvious reversal level, with the gap fill at 1316.5 today:

On NQ strong support is now established at yesterday's low at 2290, and I'd be surprised to see any move below that. There's also a support zone in the 2310-20 area that should cap any downside move today:

I'm not sure what to make of copper at the moment. I'm thinking it might make most sense to see copper as trading within a series of strong support/resistance levels. If so the next decent long entries would be a test of the 426.5 level or a break up through the 437.5 level, which is also the neckline for a large IHS, and a shorter term IHS that may be forming at the moment. On a break of 437.5 the next target would be 445.5:

It looks as though ES will gap up this morning, and there are a number of reasons to think that this gap will fill today. One of those is the tip from the GapGuy last night which was 'The past two days' unusual price action has only happened 5 times in the past 10 years and all 5 times it gapped up the next day and filled by the end of the session'.