- WE'RE JUST RANDOM SPECKS OF DUST IN A TORNADO TO THE MARKETS .......
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Monday 19 March 2012

Equities Still Testing Resistance

We've been testing resistance on equities for three days now, and they may go higher, but unless we see some definite resistance breaks, this looks increasingly like topping action to me. The key trendline to watch in my view is the rising support trendline on ES from the last low, hit overnight and currently in the 1394 area. I have rising resistance trendlines in the 1404 and 1410 areas today if we see more upside:
On SPX my strong rising wedge resistance trendline was showing slight signs of wear on Friday, but is still holding more or less:
On TRAN the February high is still holding as resistance, a break up through this with any confidence would confirm the new highs on Dow and suggest extension upwards, but while it holds this looks like topping action short term:
On IWM, the RUT ETF, the February high is also still holding as resistance, and as with ES, SPX and TRAN, negative divergence on the 60min RSI is arguing for some retracement here:
On Vix there was a wild day with a new low on Friday, but the thing I took away from the day was that Vix opened and closed within the daily bollinger bands, and the overall setup still looks bullish for Vix and possibly therefore bearish for equities, though that hasn't always been a given lately:
I'm in two minds about bonds short term here. On TLT we are still seeing consolidation under broken declining channel support in what may well be a bear flag. On ZB the setup looks more like a double or W bottom, needing a break over 137 to target a bounce to the 138'15 area. We'll see how that goes today:
I'm also in two minds about EURUSD short term here. There was a strong bounce at the end of last week to retest the broken rising channel and that may still be bearish, but there is also a possible
IHS forming there which would not. We'll probably see at least some retracement from 1.319 resistance and the key for me is whether EURUSD can break over 1.32 with any conviction. If it can then we may well see a run at the recent highs:
Overall I'm leaning slightly short today, but am watching that rising support trendline on ES for a signal that we may be topping out short term. Stats are from Danny at Mr Topstep today and they are that the week after March quadruple witching has been down 15 of the last 24 on Dow, though up 6 of the last 8. March quarter end historically gets weak going into the end of the month and has taken some large hits in the last 3 or 4 days.

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