Channel Magic

SPX broke below the middle bollinger band on the daily chart yesterday and ES has been bouncing overnight. That looks like a bear flag so far, and we'll see today whether the middle BB at 1437.67 SPX and the rebroken SPX pivot at 1440 SPX can now hold as short term resistance. It's worth noting from the chart that the daily RSI is now almost back to 50. In a strong bull trend the 45-55 area acts as decent support as I've marked on the chart, so we are now in the likely reversal zone here for a reversal back up if this is just the retracement on equities that I think it is:

Why do I think that this is just a retracement? Well we have more QE starting now which has boosted equities a lot in the past, and while we could have made a model technical top at 1440, 1475 is much less attractive. Mainly though I'm watching the rising channel on SPX from the June low. I first showed this on July 30th with the comment that only a break below the channel would put me back into bear mode and that's still true. You can see that chart I posted then here. The day after QE3 was announced I was looking for a short term high at channel resistance in the 1470 area and we saw that high made. The obvious retracement target is channel support, now slightly over 1410, and there's no reason to think that what we are seeing is anything other than a retracement unless this channel breaks. I have redone my 60min SPX chart to show how perfect this rising channel is and while it lasts it should be respected:

On the TRAN chart the low yesterday was a whisker below the last low. Obviously this is a potential bottoming setup and if wedge resistance breaks today then most likely the retracement lows on equities are in or being made. This means that a strong bounce today would look bullish. In case this is a double-bottom being made on TRAN I have marked in the trigger level and target on the chart:

Gold showed some weakness yesterday but recovered back into the trading range by the end of the day. My retracement target there is the next rising support level in the 1730 area. There is slight negative divergence on the daily RSI which is worth noting so the retracement could go deeper if 1730 support breaks:

Oil broke below 90 area support yesterday but has recovered back above that overnight. There is some positive divergence on RSI and I'm watching for a break of the declining resistance trendline:

EURUSD has been holding support at the 200 DMA so far and that may hold for a low there. I'm watching the short term resistance trendline for a possible break up:

SPX is now in the area where a retracement low could be made. I'm expecting a touch of the lower channel trendline but we could bounce and then return to hit it at a higher level than it is now. Short term I'm watching the declining resistance trendlines on TRAN and EURUSD particularly today, and if we are to see more downside this week, I'd like to see SPX hold or at least close in or below the 1437-40 range today.