Silver Breaks Up

Yet another boring day on equities yesterday with a spike down, low in the first hour and then a grind up for the rest of the day. What were the odds of that? My broken support trendline on SPX from the Dec 19th low crossed the resistance trendline yesterday so I'll now disregard it. Strong rising resistance in the 1378/9 SPX area today:

NQ looks potentially interesting here, with a small and shallower rising channel forming on the break of the main channel from the Dec 19th low followed by the conviction break of 2600. The upper trendline of that new channel is currently theoretical and NQ is testing it. If we see a reversal here then a new tradeable rising channel will be established. Some negative RSI divergence is looking promising for some short term reversal here:

EURUSD bounced at the theoretical channel support I marked in yesterday morning, so a decent rising channel has been established. EURUSD is currently reversing after testing the last high and a possible short term double-top has been setup with a target at 1.3244. If that rising channel breaks down then that may well play out:

ZB has broken short term rising support which suggests a move down of whatever size. We might see a bounce to make a double-top first though and broken support is being tested from below at the moment:

The big news yesterday was on silver where double resistance at the double bottom neckline and declining resistance from the high was broken with a lot of conviction. Short term SI is looking extended and might retrace, though I have rising channel resistance some way above in the 38.3 area. Buy on any pullbacks IMO:

Gold hasn't yet broken the possible double or W bottom neckline at 1808, but with the IHS and rising channel this is already a very bullish chart. Short term gold also looks toppy so we may well see some retracement soon. Like silver, this looks like a chart to buy on any pullbacks:

The last two charts today are from my EW friend Pug. The first is his primary SPX count on the daily, where he is expecting a retracement from this area that will stay above the 1315 pivot. He has a more bullish alternate count if SPX breaks up through strong resistance here and he thinks it might:

The second of Pug's charts is a very interesting chart where he examines the similarities between this move up and the Feb to April 2010 move up. That 2010 move up is the last time I saw a seemingly endless move that killed so many bearish divergences and trendline breaks and just kept on rising. The move ended just as SPX moved over strong resistance. Pug's not expecting a top like that one here, and neither am I unless we see a retracement below 1292 SPX, but the similarities are striking and SPX has just broken up through a strong resistance level of course. We'll see and at the very least it's a great looking chart:

For today the stats are bearish as it's the last day of the month. 60% closes down at the end of the month since March 2009 and 4 of the last 5 closed down. Tomorrow is the first day of the month and the stats are 65% closes up since March 2009, though it's worth noting that seven of the last ten of these have closed down, and eight of the last twelve, so those first day of the month stats are a good deal weaker than they used to be. In the absence of any surprises today I'd expect early weakness, a low made in the first hour, followed by a grind up for the rest of the day. If ES gets under 1364 that will look encouraging for bears, and there is a possible H&S neckline at 1353 ES where it would be very nice to see a hit.

Dow Theory Divergences

The dip buyers had yet another great day yesterday as the large opening gap down was swiftly converted into a new high on SPX since the March 2009 low. That new high isn't a break with confidence of very strong 1370 area resistance yet, but if it does break with confidence then that opens up targets in the 1400 to 1440 area as you can see on the 6yr daily chart. My preferred trendline target would then be possible channel resistance in the 1410-20 area, with my reserve target being the 2008 high at 1440.24.

There is one other thing well worth noting from the chart below. Major tops on SPX are generally preceded by a sizable counter-trend spike that sets up either a head and shoulders pattern, or a double-top or bottom. We have seen no such counter-trend spike for quite a while now, and it's unlikely that we would see a major top without one. That counter-trend spike would generally precede the high for the year by a couple of months:

On the 60min chart we are still crawling up the strong resistance trendline on SPX. Of itself that isn't actually a signal to short of course. That trendline has risen 145 points in the last eleven weeks, and if SPX continued to crawl up it then it would move above the 2007 high on SPX sometime in June or early July. What I have been watching as a possible reversal indicator is the support trendline from the Dec 19th low, but I'll generally disregard a trendline like this once it crosses the main resistance trendline, which it will do over the next day or two. Once that happens then the only really decent support trendline to watch on SPX here will be gone:

In the very short term the rising support break and negative RSI divergence on the ES 15min chart are suggesting a dip in the near future. This isn't an infallible guide, but it's been performing fairly well as you can see from the chart. Obviously this setup also looks rather bull flaggish however, so I'd like to see a break below 1368.50 support on ES to confirm:

30yr Treasury futures (ZB) and equities have diverged more than usual recently, and at the moment ZB is in a short term uptrend with SPX. I've drawn in the trendlines and RSI divergences to illustrate how well these work in a market which isn't trending strongly. The short term uptrend on ZB looks solid and I have a possible upside trendline target in the 145'20 area, though it's a little hard to see it getting there without at least a little weakness on equities:

As I said yesterday, EURUSD is still some way below my rally targets at the moment, but the short term uptrend there is looking a little tired and we might see some weakness there:

Lastly today I wanted to spend some time looking at the current Dow Theory divergence between the Dow and Transports indices. For those of you who aren't familiar with Dow Theory (DT) I'll recap it very quickly by saying that it is one of the oldest schools of TA, that it has been working well for over a century since being first developed by Charles Dow, one of the founders of the Wall Street Journal, and creator of the eponymous Dow Index. The theory behind it is essentially that in a strong uptrend or downtrend both indices need to confirm new highs or lows, and that when one index makes a new high or low that is not confirmed by the other, then it is a signal that a significant top or bottom may be close.

Here's the weekly Dow vs Transports chart over the last 15 years to illustrate that DT divergences are generally seen at most major highs and lows on the monthly chart, with March 2009 being a notable exception. The current divergence is very striking, with Dow over the 2011 highs and Transports still well below:

Looking at these indices on the one year daily chart, you can see that these indices generally track each other well. There was a new high on Transports in July 2011 that was not confirmed by the Dow and that preceded the waterfall last summer. There was no divergence at the October low, though these divergences do appear more reliably at highs than at lows. The current divergence is very striking, and comparable to that seen at the 2000 and 2007 highs.

What's worth bearing in mind however is that this DT divergence would be eliminated as soon as Transports beat the 2011 high, and that significant previous divergences in 2004 and 2010 lasted for months before confirmation. The divergence in 2004 lasted about six months before Dow confirmed with a new high at the end of that year. It is interesting though, and worth keeping an eye on. If SPX should fall below 1292 I would start paying this signal much more attention:

Short term I have strong trendline resistance on SPX in the 1377/8 area today, and with ES at 1373 as I write, that's obviously just above. That resistance trendline might break but it's a strong six-touch trendline that is in any case rising fairly steeply. The chances are it will hold, so I'm looking for some retracement here. Have I seen trendlines like this one break in strong uptrends before? Yes, so it does happen. There's a lot of information on the  charts today that isn't in the writeup, so if you want to see that you'll need to click on the charts for the full size version.

Trendline Setups

I've been hearing a lot of talk over the last two weeks about how it's bad to call tops or bottoms, and that the SPX may get to the moon before we see a meaningful reversal. That's a view certainly, but there are a couple of points to make about that view. The first is that buying low and selling high is about not blindly buying trends. When you've seen a strong uptrend and you're in overbought territory you should look for some reversal, just as you should after a strong downtrend in oversold territory.

The second is that more than anything else I am a trendline analyst, and I look for short term reversals at trendline support and resistance, and bigger reversals when trendlines break. That doesn't always deliver the goods, but it delivers them a lot of the time, and SPX is currently showing trendline weakness, on negative RSI divergence, at major long term resistance. That is an obvious level to see a reversal of whatever degree. It might not be a major top, but it may well be a minor one.

Here's the setup on the SPX daily chart showing the negative divergence on the daily chart, the strong resistance area SPX is in, the very strong uptrend that has brought us here, and the obvious room within the daily bollinger bands and above the 50DMA (1301.48) for a retracement within this uptrend:

On the 60min chart a break above the strong resistance trendline would obviously be bullish, but we haven't seen that yet. We have however now seen two breaks of the support trendline from the Dec 19th low, and that broken support trendline is now acting as short term resistance. While that is the case the trendline bias has to be short here:

On NQ the trendline setup is also leaning bearish. NQ broke down slightly from the strong rising channel last week, bounced over 2600, but has now broken back below 2600 and the channel support trendline. Again, this is a short term bearish setup:

Vix could go lower from here, but short term it is bouncing at obvious support at the daily lower bollinger band and the longer term falling wedge setup looks bullish for Vix and therefore bearish for equities:

EURUSD broke over short term trendline resistance on Friday, and while we may well see an overbought retracement here, I'm not looking for a major high here. The two levels I'll be watching for that are declining resistance from the August high, currently in the 1.364 area, and declining resistance from the 2011 high, currently in the 1.3925 area:

I'm not sure about the higher EURUSD target, but the lower one would certainly fit well within my overall USD rising channel with possible monster IHS forming. That's progressing well with a possible falling wedge forming within the larger rising channel:

I posted the important double resistance on silver futures last week and as it happened SI reached it that day. There are some signs of weakness on both silver and gold here and we might see at least a retracement here. Gold and silver may well both be into strong new bull moves here, but for confirmation I'm looking for silver to break declining resistance and the possible double bottom neckline and for gold to break the possible double-bottom neckline. Both may well retrace here before doing that:

The overall setup on equities today looks weak, though we might well see a bounce to fill the opening gap. Strong trendline resistance is now in the 1375/6 area, and we might yet see a bounce to test that, though I'm leaning against that on balance. In terms of a bullish break up, there is nothing to see unless that trendline breaks upwards, and though we might see SPX continue to crawl up that resistance trendline, while it holds the trendline bias is short. There is a potential short term double-top on SPX which needs a lower low to confirm. As I said last week, I'm looking more a move below 1350 SPX to confirm a short term high is in.

Oil Musings

Another day with no significant reversal on equities, and though upside progress in the last two weeks has been very limited on SPX, it is still crawling up the strong resistance trendline I have on the SPX 60min chart. SPX is now trading under the support trendline from the Dec 19th low and is showing increasing negative divergence on the daily RSI, but is showing little sign of actually retracing. In the event that SPX should hit my resistance trendline again, I see that in the 1372/3 area today, so we may see a test of the 2011 high shortly:

The picture across other indices looks mixed at best. On NQ the strong rising channel support trendline was pinocchioed yesterday morning, which was promising for retracement, but overnight NQ has broken and stayed above strong resistance at 2600, which is alarming, as I have channel resistance currently in the 2658 area:

There's been little movement on the Transports index, but the positive RSI divergence I've been looking at there is still there, and TRAN is trading slightly above the broken H&S neckline. A stronger bounce there is still therefore in play:

I was looking at the Vix Buy (equities) Signal and confirmed bearish engulfing candlestick there on Monday and the track record of Vix Signals is so mixed that I am inclined to disregard it. Bearish or bullish engulfing candlesticks are another matter however, and a confirmed one of these generally leads to at least some continuation. We were seeing that yesterday and Vix reached the first obvious target which is the lower bollinger band. The other is broken falling wedge resistance in the 15.5 area, so we might see a further move down on Vix:

One thing that is encouraging for bears here is that EURUSD is now very close to reaching the upside targets that I have given over the last few days, having touched 1.3405 overnight. The IHS has already played out to target, and I had the pennant target in the 1.341 area. I have trendline resistance in the 1.3415 area and a reversal there would at the least mean that SPX would lose the short term uptrend support that a spike up on EURUSD delivers:

Oil spiked up very hard yesterday after hitting short term rising support and I had a nice looking rising wedge going there until CL blew through the upper trendline last night. That might be a wedge overthrow of course, but if it isn't then I'm not seeing much resistance between here and last year's high in the 115 area. I won't show it today but I do have a possible IHS on the daily chart indicating to the 130 area and that's something to bear in mind, especially as declining resistance from the 2008 high also broke yesterday:

Every so often I chat to parents of my childrens' schoolfriends at parties and so on, and in late 2010 I remarked to one of those parents that I was expecting that rising food prices would destabilise and topple some governments in poorer countries. As the Arab Spring then unfolded during 2011 with governments toppling in Tunisia, Egypt and Libya, and with unrest and unsuccessful (so far) uprisings elsewhere, my reputation as a seer with him was firmly established, so late last year he asked for another prediction for 2012. I replied that though it might well not happen, I was seeing a real possibility that oil prices might hit $150 in 2012.

That wasn't a chart target and regional instability is obviously one factor behind that prediction. The other is the fast changing basis of crude oil demand, with rapidly increasing demand from the world excluding the US, Europe and Japan, only partly masked by gently falling demand there. Oil demand is growing fast and supply is relatively inelastic, so there is a growing imbalance there that can only be curbed either (temporarily) by economic weakness in emerging markets, or by price rising enough to choke off rising demand and increase supply. Throw in instability in oil producing regions and a possible confrontation with Iran, and you have a potentially very explosive mixture. We'll see.

Here's a great chart from Chart of the Day showing the demand levels from the old world and the new since 1987 and you'll see what I mean. You can see the original article here or by clicking on the chart below. I highly recommend their free emails every day with thought-provoking charts covering many areas:

Overall there seems a good chance that the 2011 high on SPX will be tested today, though I'm not expecting a move above 1376 at the most as anything higher would break my very strong resistance trendline. EURUSD is now at my 1.3415 target and we'll see whether that resistance holds. A break above resistance on SPX and/or EURUSD would look bullish and would open up higher targets. We may see early weakness of course as the intraday pattern still strongly favors lows in the first hour followed by a grind up for the rest of the day.

The Acid Test for Gold and Silver

The SPX support trendline broke down yesterday, and the short term high could be in, though I'd like to see a move below 1350 SPX for more confirmation that this seemingly endless up move has finally peaked. Trendline resistance still looks very solid and should be in the 1370 area today. The 2011 high was at 1370.56, and a  test at that level would have some technical merit, so I wouldn't rule it out quite yet:

I've been looking at the rising channel on NQ as a decent trend change confirmation, so I was very pleased to see that the NQ low overnight was at that channel support trendline, which strengthens it and makes it a better signal on a break downwards. It is very much worth bearing in mind however that it has not broken down yet. Resistance in the 2600 area still looks solid and the channel support trendline should reach 2600 next Tuesday, so there must be a break either way by then:

I looked at the Transports chart again last night, and inexplicably I managed to miss yesterday morning that the potential H&S there was already fully formed. The correct version is below and there was a tentative neckline break yesterday. The positive RSI divergence at the moment is however a warning sign that we might see a bounce here:

The pennant on EURUSD that I was looking at yesterday morning has broken up, and the rising wedge resistance trendline, IHS, and pennant are all now arguing for a hit of trendline resistance in the 1.34 area, so that looks fairly likely. There is a potential double-top established at the overnight high however, so that's worth bearing in mind today:

Gold broke my IHS neckline on the daily yesterday, which is very encouraging. However there is an important resistance test coming up on both gold and silver to confirm that the primary trend on both is now up. On gold that test is at the potential double-bottom base/neckline in the 1810 area and a break above there would target the 2100 area:

The chart to watch with that gold chart is the silver chart, where there is an equivalent potential double-bottom base/neckline at the 35.75 level. That test is really important as there is double resistance in that area, with declining resistance from the silver high reaching the 35.75 level within three or four days. If silver and gold can clear these levels the path looks clear for a further strong move up over the next few months:

The last chart today, apropos of nothing in particular, is the surprisingly grim looking monthly (LOG) chart for PepsiCo. I was talking to my wife about this yesterday and she was saying that it was a surprising chart to see for such a decent looking blue chip company. I replied that I agreed, and that the grim looking setup might well not play out, but added that it was worth dumping from any long term buy and hold list just in case it did. Not every chart that looks like this ends with a waterfall decline by any means, but many waterfall declines start with a chart that looks something like this one. The RIMM chart I posted last May just before the massive decline is a good example of that and you can see that here:

I think that the short term top is close or already in. For confirmation that the top is in I would like to see SPX below 1350 and a break down from that rising channel on NQ. I am still seeing some potential for a new high on SPX that would test the 2011 high at 1370.56 and would probably coincide with a test of trendline resistance on EURUSD. If we see that it would be a very nice looking short entry level for both with stops not far above.

Unprintable Money

It really is a funny old world that we live in. The British Pound was hammered overnight when some meeting minutes were released showing that two of the seven members of the British MPC voted for more QE than the others. Why this matters nowadays who knows?

The UK is generally seen as a pillar of fiscal rectitude these days as it is taking steps to rein in government spending and to keep public debt at levels where it might credibly be repaid someday. As a result it has taken quite a bit of criticism from the US and much of the EU, where plans for managing government debt at a sustainable level are being disregarded outside the PIIGS.

On the other hand the UK is currently running deficits of 10% of GDP, and has now printed money to buy UK debt of $350bn, something over a third of all UK government debt currently outstanding. In effect most of the huge deficits run in the last three years have been financed by printing money. That it is seen as a pillar of fiscal rectitude nonetheless speaks volumes about the profligacy of the countries to which it is being compared.

This is the backdrop for the huge bull market in gold that has been running since Gordon Brown, the inept UK Chancellor of the Exchequer, announced in 1999 that he would sell 395 tons of gold, almost 60% of the UK's gold reserves,  in order to buy interest-bearing US treasuries. Those sales were made over the next two years and immortalized his name in the famous Brown (double) Bottom of 1999 and 2001. Gold hasn't looked back since and at today's prices that decision has cost the UK over $20bn so far.

Gordon Brown went on to become an even more worthless Prime Minister in due course, and has a further enduring legacy in the shape of the vast deficits he bequeathed to the next government. He has now retired to Scotland, and commands large fees on the lecture circuit explaining why his disastrous legacy was unforeseeable and not his fault. Perhaps he runs into Alan Greenspan doing the same every so often.

Gordon Brown's argument for selling the gold was that it paid no interest, but nowadays the 0% real return on gold looks very generous, against negative real returns on government debt in the US, UK and others. Central Banks also can't print more gold to debase it, which is a huge advantage against the increasingly debased currencies of the western world, so there is every reason in my view for the bull market in gold to last a lot longer and go a lot higher.

Short term however, gold is at a crossroads. On the daily chart an IHS has formed that would take gold to test the 2000 area if it plays out. It is fully formed now and testing the neckline. There is also a possible double-bottom in play that would target 2100. I've marked both up on the daily chart below:

In the short term though, gold is showing negative divergence on the 60min chart, and may retrace here. I have rising channel support in the 1728 area, and a move below that would set up a short term double-top indicating to the 1650 area. I'll be watching that channel support carefully:

On the equity charts I was watching carefully for a break of rising (sort of wedge) resistance on SPX to see whether the Vix Buy Signal might boost SPX through resistance. That didn't happen and the high yesterday was exactly at the resistance trendline level I gave yesterday morning. The retracement that followed then bounced at the rising support trendline that started to break down last week, showing that trendline is also still in play.

There are two things to note from this. The first is that until that resistance trendline is broken on SPX, this is a topping setup, and the most likely break direction is downwards. The second is that is that these (sort of) rising wedge trendlines are now very close together, and will in fact cross in about a week. The range between those trendlines is less than 10 points now, and getting smaller by about 2 points per trading day. We are extremely likely to see a break one way or the other by the end of this week:

The NQ chart today looks pretty much the same as it did yesterday. The narrow rising channel from the December low is still holding, and strong resistance at 2600 is also still holding. I have the channel support trendline reaching 2600 on Tuesday next week, so as with SPX, we are likely to see a break one way or the other this week:

The Transports chart has been the weakest of the major indices over the last few days, and there has already been an almost 5% pullback from the high there, as well as a break with confidence of rising support from the October low. Looking at the chart this morning though I'm seeing a hit of support from the last significant retracement low, and that has formed the left shoulder and head of a possible reversal H&S. A reversal here would also be on significant positive RSI divergence on the 60min chart. We might well see Transports bounce strongly here to form a right shoulder.

This weakness in the Transports index is also a Dow Theory non-confirmation (so far) of the new highs on the Dow. It is a large non-confirmation as the index is some 9% short of the 2011 high it will need to exceed to confirm the new highs on Dow. Nothing to get really excited about yet in my view however, I've seen these non-confirmations last quite a while in the past before without any serious top happening. Interesting, but as with Vix Signals, often not significant:

EURUSD looks important for immediate direction here, and the obvious direction is up to the IHS target and trendline resistance in the 1.339 area. A bullish pennant appears to be forming that would have a target slightly over 1.34. I'm concerned by the breakdowns on GBPUSD and AUDUSD however, and it may be that EURUSD will go the same way, so I'm watching pennant support in the 1.3215 area and the IHS neckline in the 1.318 area. If EURUSD closes an hour below 1.318 the current bullish setup will be badly damaged and we might instead be looking at a bearish double-top. That bearish scenario is worth considering as more details of the greek 'rescue' are published. Rarely has even an EU plan been so ill-conceived, so dependent on unrealistically optimistic economic assumptions, and so harsh on the electorate on whose strong support the durability of the plan will depend. Failure seems likely to be just a matter of time:

I was accused of being wishy-washy yesterday and I cheerfully admit to that again today. The uptrend is still intact, but so is the strong bearish setup and SPX is now bumping up against both trendline resistance in the high 1360s and strong resistance at the 2011 high in the 1370.60 area. Despite the Vix Buy Signal, the bearish engulfing candlestick on Vix, and the (currently) bullish looking setup on EURUSD, I wouldn't suggest to anyone at this level that going heavily long would be a good idea, and until we see support break again on SPX and break on NQ, shorting this may also have a very unhappy ending.

Overall however I'm still leaning short. Until we see SPX and NQ break resistance, the topping setup I was looking at last week is still very much in play, and it is the bulls that have something to prove here.

Vix Buy Signal Confirmed

I was saying on Friday morning that a lower close on Vix that day would confirm a Vix Buy (equities) Signal, and also a bearish engulfing candlestick on the Vix daily chart. Vix confirmed both on Friday and that very much needs to be borne in mind as a strong warning signal here for equity bears. The situation is more complex than that of course, with the bullish (for Vix) falling wedge giving strong support at the broken upper trendline in the 16 area, but obviously we might well see another retest of that broken wedge resistance in the near future:

The ES chart is giving some support to the bullish scenario, as my resistance trendline from early December was broken at the globex open on Sunday. I'll be watching the SPX equivalent to see if that is confirmed during real trading hours. If it is then I'll be writing off the bearish rising wedge type pattern from the Dec 19th low, as although rising wedges often overthrow before resolving downwards, a break of wedge support before that overthrow suggests that the pattern may well resolve up instead. If we do see the resistance trendline on SPX broken then I'll be watching strong resistance at the 2011 high, and if that is broken, I have a rising channel marked in green on the chart below with resistance in the 1383 area today:

On NQ the rising channel I posted the other day is still holding firm, though resistance at 2600 is also holding firm. Obviously one or the other will need to break in the next two or three days so we'll see. NQ traditionally finds resistance at the 200 point markers of course and took several attempts before taking 2400 and holding it:

Obviously EURUSD is pivotal at the moment, and an agreement for Greece to default in an orderly manner was agreed yesterday. Despite the effective 75% writeoff for private sector bondholders the terms are still so harsh that even on the rosy growth assumptions I understand that the greek debt to GDP ratio will still be at 170% in 2015 and 120% in 2020. Realistically this dog won't hunt for long, but the crisis has been expensively deferred for the moment at least. Over the weekend EURUSD broke the declining resistance trendline from the highs and an IHS has formed that I have marked on the chart below. The target is in the 1.339 area which fits with my rising resistance trendline on the chart. If we see a break below the IHS neckline in the 1.318 area then this will look less bullish, but for the moment I would assume that we should see a hit of resistance near 1.34 within a few days:

A couple of other interesting charts to end the day with are the oil and gold charts. When oil broke declining resistance from the high a few days ago I suggested that might see a test of the highs.We've now seen that test, then a new high, and then a gap over rising resistance just under 105. For the moment that broken resistance is support and more upside seems likely whether or not we see some retracement here:

Gold is also looking interesting here. The rising channel from the low broke down a few days ago, and that was obviously bearish, but support at 1700 held well, and a larger rising channel (marked in green) has now been established. Declining resistance from the high has been broken and I'm expecting more upside with a possible target in the 1850 area at the upper trendline of the green rising channel:

The odds for a gap fill on SPX today look decent, and if we then see a break of rising wedge resistance in the 1367 SPX area I'll be watching strong resistance at the May 2011 high at 1370.58.

Groundhog Day

I did mention yesterday morning that Wednesday's trendline break didn't preclude a new high and obviously I was glad I did, even if that seemed a bit wishy-washy. I've watched that film before, though I was surprised to see a new high made so fast yesterday. That leaves us pretty much where we were on Wednesday morning, with the trendline break in the meantime as a significant sign of weakness. Trendline resistance is now in the 1365 SPX area:

There's a similar setup on the ES chart with trendline resistance there in the 1362 area. There's also an interesting looking broadening formation, right-angled and ascending, that has formed over the last few days. These patterns break down 66% of the time:

I was looking at the NQ chart as well, just to marvel at the almost 400 point run there since the Dec 19th low. In the past NQ has always struggled at the 200 point markers, and it took a year and several runs at it to clear 2400 with confidence. One significant reversal from 2600 so far:

There was a very impressive spike up on EURUSD yesterday and it may be that it is going to make a run at my original target area at 1.35-6. However the lower low it made yesterday morning was also impressive, and EURUSD is going to have to make a higher high, and break declining resistance from the high, before it starts to look bullish again. I have that declining resistance in the 1.32 area:

I've saved the most interesting chart for last. I mentioned yesterday that a close back within the Vix bollinger bands would look bullish for equities and we saw that. That has triggered a Vix buy (equities) signal and Vix needs to close down again today to confirm that. The more interesting thing however was that the daily candlestick on the Vix yesterday was a bearish engulfing candlestick. That also needs a lower close today for confirmation.

Vix buy and sell signals are very hit and miss, and you can see from the last three signals marked on the chart below that only one of them actually delivered the goods. I'd be inclined to ignore a signal like this so far into an uptrend. The bearish engulfing candlestick is a more serious matter altogether. If Vix confirms with a lower close today then I would expect more downside for a few days at least, and it's worth noting that another retest of broken falling wedge resistance in that timescale might involve a retest of the recent Vix lows:

Overall I have mixed feelings here. We are still just under strong resistance on both ES and NQ. Copper and EURUSD both made significant lower lows yesterday, and while they've both bounced strongly from those, the overall setup on both still looks bearish.

Much depends on the Vix today. If it closes down and confirms the signal and engulfing candlestick, that will be a serious warning that we could see SPX and NQ gap over resistance just above and I'd take that double signal seriously.

The stats for today are bearish however, and the day after a trend day also generally sees some retracement or a sideways move. It may well be that Vix closes up and fails to confirm this bearish engulfing candlestick just as the similar candlesticks on SPY and AAPL on Wednesday were negated yesterday.

I'm expecting to see some retracement today and am looking for support at the broken and recovered rising support trendline in the 1350 SPX area. If that is broken with confidence then it's worth mentioning that there is currently a double-top setup on ES indicating to the 1310 area on a conviction break of 1334. I'm not expecting to see that play out though, and my WAG for the next few days is that we see some modest retracement today, followed by a test of the 2011 high on SPX on Tuesday or Wednesday of next week. Most likely we should see a more significant retracement from that area. If we see SPX gap up over that resistance and run, then a string of higher upside targets will open up, and the chances of that happening will be much higher if the Vix closes down today.