- WE'RE JUST RANDOM SPECKS OF DUST IN A TORNADO TO THE MARKETS .......
- CHARTISTS MUST PUT ALL BIAS ASIDE AND LET THE CHARTS DO THE TALKING OR WE'LL SEE ONLY WHAT WE WANT TO SEE
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Friday 22 November 2013

Higher Probability Paths

Before I start today I'd like to nominate my pick for best chart of this week posted by anyone anywhere, and that was the RUT 15min chart that I posted on twitter on Wednesday night. The version updated to yesterday's close looks like this. RUT 15min chart: 
Obviously the falling wedge on SPX broke up yesterday and the break below on Wednesday afternoon was just a bullish wedge underthrow, so the bizarre possibility I raised yesterday morning that bears might have overridden a strongly bullish scenario turned out not to be the case. The target for that falling wedge is at a retest of the highs and we may well see that happen today. SPX 5min chart:
However this retest of the highs may well be putting in the second high of a double top. The rising wedge from the 1646 low broke down on Wednesday and that cannot have been a bullish wedge underthrow as there had already been a bearish wedge overthrow. What I am expecting to see here is a double-top form with the low on Wednesday as the pattern trigger level for a double-top target in the 1750 area. SPX 60min chart:
If we do see the highs retested, and very possibly exceeded, today then I am expecting the SPX weekly upper bollinger band to close no higher than 1804, and as I am not expecting to see another punch above the weekly upper bollinger band I am expecting to see the close today no higher than 1806 SPX. The strong resistance trendlines that SPX touched and reversed at on Monday morning would be tested again on any break above Monday's high and if those trendlines are going to hold, then that new high should be marginal and the second high of a small double-top on SPX targeting very strong support in the 1750 area. SPX weekly chart:
On that basis I am seeing three higher probability paths from here, and have marked the three on the SPX daily chart below. The first and least likely option for a number of reasons in my view is that SPX breaks up here, confirming the rising wedge targets in the 1900s. This option looks unattractive from a weekly bollinger bands standpoint in particular, but the holiday week next week could deliver a low volume grind up to break SPX through resistance, so I will be considering this option seriously. The second option is that SPX retraces here to test strong support in the 1750 area and that support holds as a springboard towards those same wedge targets in the 1900s. The third option is that all the patterns from October 2011 have been within an overall rising channel, and that 1750 support then breaks on the way back to test rising channel support, currently in the 1575 area. I don't have a preference between the second and third options really. We'd find out which was the runner at the test of support in the 1750 SPX area. SPX daily chart from Oct 2011: 
On other markets I posted charts giving my views on TLT and oil on twitter yesterday morning and the move up on oil has already started. For anyone long CL with me I would say that 95 should hold on an hourly close basis now and if we see a break back below then I have some more immediately bearish options that I'll post on twitter. Until then I'm looking for the 98.25 area on a break over 95.75. 

What I will show this morning is the GBPUSD chart. Every so often I post a currencies chart with a high probability pattern target a long long way away, as I've done with Yen last November, AUDUSD several times and this is not one of those charts .... yet. Sometime in the next few weeks I will post this chart with a wild sounding target that will most likely be made and that will be when GBPUSD breaks either up or down out of the current triangle from early 2009. I have posted a few triangles this week that broke one way before resolving the other and this is just a much larger example. If it breaks up from the triangle now the upside target is in the 1.97 area, and if it breaks back down the target will be in the 1.21 area, though with very strong long term support in the 1.36 to 1.42 area. Watch this space. GBPUSD weekly chart:
For today what I am hoping to see is an AM low in the 1786-89 ES area that is followed by a grind up into new all time highs this afternoon. There is decent support at 1792 ES however and any morning low may stall there. I should also mention that I will be away between Wednesday 27th November and Tuesday 3rd December and may well do no more than post some charts on twitter during that period. Everyone have a great weekend :-)

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