QE Synaesthesia

I've drawn in the three main topping options from here as I see them on the 60min SPX chart and they are:

• Fall from here to test wedge support, and then break the wedge to trigger the main summer retracement
• Test or slightly exceed the highs to form a double-top targeting the 1580 area
• Retrace to wedge support, then test or slightly exceed the highs to form a double-top targeting the 1500 area

I'm favoring seeing a test of the current highs before a more serious retracement and that's for three main reasons

• There is generally a test spike down before the main retracement. 
• SPX daily RSI negative divergence is currently small. A test of the highs would deliver divergence on a more usual scale. 
• The next main time area to see significant interim highs made is from late June through July. 

Here's how that looks on the SPX 60min chart:

Looking more closely at the SPX 60min chart you can see that SPX gapped down through trendline support on the rising channel from 1536. This is generally a sign of a solid break and I'd expect some follow-through from here. If SPX can close an hour back over this broken support trendline, that would clear the path for a test of the highs:

On balance I'm leaning towards yesterday being an oversold bounce and more downside coming shortly. In part that's because on the last four occasions including the November low where the 30 level has been penetrated on the SPX 60min RSI, there has been positive RSI divergence before the reversal back up. There is no positive 60min RSI divergence evident on SPX at the moment. On the ES 60min chart much of yesterday's bounce has since been given back overnight, and on a conviction break of yesterday's lows I would be looking for the next support in the 1600-10 area:

CL is still flirting with breaking down from the possible double-top there. As this would be a continuation of the greater trend down I think that's likely to happen:

A retracement may well be starting on USD as well as SPX, and they are positively correlated these days of course. I'm watching the falling wedge below on GBPUSD for a signal whether this will run much further:

In other news Fed officials dismissed suggestions that QE might be triggering irrational rises in asset markets:

Everyone have a great holiday weekend and I will be doing a post on secular bear markets over the weekend. :-)