Rubber Bands

ES and SPX bounced very strongly off the daily middle bollinger bands yesterday morning and SPX closed back at the daily upper bollinger band. Kudos to my trading room bud Mike Vacchi of Princeton Trader for predicting the exact low on ES in the premarket to within a tick (at the ES daily middle bollinger band) and going long at 1754.5 (to my channel based entry at 1756.5). I hope some of you saw me tweet the bullish falling megaphone on ES before it broke up, and later tweet the likely close area before the last move up. We had a VERY nice day.

So where does that leave us this morning? I had a very nicely formed rising megaphone on ES that broke down not that long after the close and while no globex patterns or signals are as reliable as the regular trading hours SPX equivalents, what I would normally expect here is that an H&S or double-top would form and we'd see a fib retracement of the megaphone move. That scenario is still in play and if that plays out the topping pattern is still forming. I have marked some fib retracement targets on the chart but would stress that there is still a lot of upward pressure here, and that after SPX puts in a likely morning low we'll most likely see strength for the remainder of the day. ES 5min chart:

I've been using the clear setup on RUT as an indicator for likely SPX direction this week and it's worth noting this morning that RUT closed yesterday at 1112.18. I'm expecting a retest of the highs at 1123.26 on the falling wedge setup and I also have an IHS target in the 1126/7 area. There is therefore a reasonable expectation that RUT should rise another 1% or so into the end of the week, and I'd expect SPX to tag along for at least part of the way there. RUT 60min chart:

On Monday I gave a maximum likely closing range of 1790-5 with possible spillover to 1800, and unless we are to see a strongly bearish punch above the SPX weekly upper bollinger band (BB) then I'm still expecting that to be right. On ES I am expecting a close at a maximum of 1788.4 at the weekly R2 pivot. The SPX weekly upper BB closed at 1786 yesterday and if we see more strength today I'd expect to see that in the 1790 area tomorrow. SPX weekly chart:

Normally I would say that the SPX daily upper BB should rise at 5-7 points per day in a strong uptrend, but that is when it is already rising. As the SPX daily upper BB has been declining the last few days, and takes a day or two to stop and reverse, I'm not expecting more than a marginal rise at most there today. As SPX close at the upper band yesterday that suggests that we may well see a punch above the band at the close today. SPX daily chart:

I've been mentioning my wedge targets in the 1930 and 1965 SPX areas very regularly in recent weeks, but I have a possible pattern setup that could negate those targets. That setup would have both the rising wedges that have broken up within a rising channel from the October 2011, with channel resistance now in the 1800-5 area. I think seasonality and the QE setup over the next few months make a big reversal at this channel resistance a long shot, but you never know, and in any case we may see a smaller reversal in that area. SPX daily chart from October 2011 low:

On other markets I was looking at the GLD daily chart this morning and unless GLD can break back over 130 with some conviction new lows seem just a matter of time, though there might well be a decent buy opportunity there of course. GLD daily chart:

The CL chart is looking interesting here. I'm not expecting a serious low to be in yet but there is now some positive divergence on the daily RSI as CL Is forming a possible double-bottom. On a decent break above 94.4 the target would be the 97 area for a likely test of declining resistance from the 110 area. CL daily chart:

I'm expecting to see some follow through from yesterday's SPX move today and most likely that would take the form of a push up from a morning low on SPX. Having said that I'm expecting the weekly R2 pivot to be good weekly closing resistance tomorrow, so any move above 1788.4 ES (1791.4 SPX) will start to look attractive on the short side.