Slope Of Hope with Tim Knight

Bottom Building in Natural Gas (by Mike Paulenoff)

The bottom-building processing in natural gas and its related ETFs continues. The ProShares Ultra DJ UBS Natural Gas ETF (BOIL) pattern begins to round to the upside towards a confrontation with its Jan-Feb resistance line, now at 13.95, which if hurdled and sustained should trigger upside follow-through directly to test the prior rally peak at 14.55 (hit on Feb 7).

Right now, my near- and intermediate-term work argue strongly for upside continuation and acceleration. That said, the patterns and anecdotal evidence are potentially so bullish that I am expecting the next up-leg to be accompanied by a fundamental catalyst that is so compelling from the long side -- and such a game-changer for the shorts -- that the latter group has to cover and perhaps reverse its polarity.

Topping Out (by Springheel Jack)

Shortish posts all this week I think as I'm a bit distracted offline. On SPX we have nice clean trendlines now, and those trendlines are suggesting that upside is limited and a more significant retracement is close. I wouldn't go so far as to call this a rising wedge on SPX, or if I did I would take it from the 1333 high and next 1300 low, as the long move from 1202 to 1333 without touching either trendline, was too long in my view to qualify the overall setup as a rising wedge. Support is in the 1340 SPX area and resistance is in the 1360 SPX area, and on a break of the support trendline I would see the obvious target at the rising support trendline from the November low in the 1305 area. Support to watch on the way there is at the middle daily bollinger band (20 DMA) in the 1327 area:

Bearskin Rugs (by Springheel Jack)

I was joking on twitter yesterday morning that the short-term bearish setup I was looking at looked very tempting, even if people were having to climb over piles of bearskin rugs to get to the screens to see it. Needless to say there was a report early in the day that the Greek are very close to finalising their no-default default, and both EURUSD and ES broke up hard to trash that bearish setup. This market remains in a strong uptrend and JBTFD is still the order of the day.

It still looks early to think about a top on EURUSD and GBPUSD at the moment. I've been posting my big picture USD chart and the obvious target is a hit above 76.72 in mid to late February. I can't see any reason to doubt at the moment that we will see that level hit, and at that point we will see if that rising channel on USD can hold:

Teasingly Ambiguous (by Springheel Jack)

It's often tempting to anthropomorphise the markets, whether describing the movements of the markets, or referring to the dark forces that some feel are manipulating the markets behind the scenes. I don't subscribe to the latter view, as I think that the force manipulating the markets is doing so quite openly, and that force is the Fed, helped by other central banks, keeping interest rates negative and flooding the world with new money in the expectation that rising asset prices will boost the real economy. I do sometimes anthropomorphise the market however, and this week the market is being a tease.

I mentioned yesterday morning that a break above my SPX declining channel would open the way to a test of the highs and that was what we got, to within three points. In terms of direction that resolved absolutely nothing, as the failure at the afternoon high on SPX was a lower high, a potential double-top, and a second test of declining resistance from the 2007 high. Here's the updated big picture SPX daily 6yr chart:

Cautiously Bearish (by Springheel Jack)

This retracement on equities isn't breaking any speed records so far, and probably won't. However it looks encouraging and I thinks there's a decent chance that it will reach rising support from the November low, which would be in the 1275 SPX area today. On the SPX 60min chart that would confirm the lower trendline of a rising wedge and deliver an upside target range after the bounce at wedge resistance, which would be very nice to have:

Something's Fishy in Tripoli (by OilPrice)

Way back in early 2011, members of the U.N. Security Council had no problem getting a resolution through that authorized military force in Libya ostensibly to protect civilians from attacks by forces loyal to strongman Moammar Gadhafi. The year before, lawmakers on both sides of the Atlantic were bickering over who did what and why in terms of the cancer-stricken Lockerbie bomber. This Scottish decision to release him, depending on which U.S. lawmaker you spoke with, was tied to a BP deal to drill for oil in Libya. Despite fractures in the new interim government in Tripoli and reports of renewed protests, a decision by the Italian government to quietly discuss trade relations suggests something isn't quite right in the way Western allies pick their fights.

Triple-Bearish ERY Scraping Bottom Again

Looks Promising (by Springheel Jack)

The rising support trendline for the current move up on SPX broke and retested yesterday, and the setup for a retracement here looks very promising. That retracement should stay above 1267 SPX unless we see a major bearish break. The rising wedge target is 1277 SPX and an IHS may be forming with a target in the 1296 SPX area. ES has broken strong support at 1305 overnight which is also encouraging:

I have a nice looking rising channel on NDX as well with channel support in the 2400 area. That's worth keeping an eye on as the next obvious trendline support is a long way below:

The moment of truth for gold is here, with it starting to test the double resistance at declining resistance and the broken 150 DMA yesterday. A break above would look very bullish but a failure here obviously just the opposite. Until that resistance breaks this is a short entry level of course:

Given the geopolitical situation on oil, I should be seeing some bull setups on CL (March) here, but I'm not. There is double resistance overhead at broken support and declining resistance, and this chart would at least look less bearish if that is broken. Until that happens however I'm seeing an H&S target at 92.5 and if CL gets below the double-top neckline at 92.9, the double-top target is 81.8. Both targets look ambitious given the current situation with Iran, but unless we see a break up through double resistance not far above, CL has a very nice topping setup here with targets a long way below current levels. From a technical perspective the decent risk/reward swing setup is still short:

EURUSD has so far fallen 18 pips short of the 1.308 target I gave yesterday, but has reversed at a possible alternate sloping neckline for the IHS that I think maybe forming here. Ideally it would now retrace into the 1.285 area to form the right shoulder, and if it were to play out then the IHS target would be in the 1.35 area. Negative divergence on the 60min RSI looks promising for retracement here:

On the bigger picture for USD, a significant bounce for EURUSD should set up the right shoulder on a possible much larger IHS on USD that would target the 90.5 area. There is a question in my mind as to whether the battered Euro can manage a strong bounce here, but a retrace on USD into rising support in the 77 area would set up a very nice USD long play. As ever time will tell:

ZB hasn't made my downside target at 139'25 or declining support in the 140'10 area, but is nonetheless showing signs that it may be making a short term low here. I'm watching the steep declining resistance trendline for a break up. RSI also looks promising:

I'm leaning short today, but we might yet see a bounce from the overnight lows and the gap fill looks possible unless SPX gaps below 1309, in which case it will seem less likely. Retracements have been disappointingly shallow lately, but I'm ideally looking for the SPX rising wedge target at 1277 as my downside target in a retracement that should last two to four days. After that I'll be looking for a move up to higher highs unless we see a breach of 1267 SPX, which would cast my current view on SPX into doubt.

I'd love to call a major interim top here but I'm not seeing that as likely yet. There are a couple of charts that would support that though, and I'll certainly be watching my line in the sand at 1267 SPX in case of a break below. The first bearish chart that I haven't posted today is my 6yr SPX chart that shows a perfect test of declining resistance from the 2007 top at the high yesterday. The second chart is the Vix chart, which triggered a Vix Sell (equities) Signal with the close back within the daily BBs yesterday. A higher Vix close today would confirm that signal and that would promising for a high here, though the track record of these signals is somewhat mixed. We shall see.

Monday Thoughts (by Springheel Jack)

My post will be a bit different today. As I have mentioned frequently, the current move up from the December low on SPX hasn't delivered much in the way of decent overall trendlines, so I'm going to present the consensus view from the EWers, who have had an impressively good handle on the current move up. You'll have to excuse my amateurish EW labelling and chart, but while I always keep an eye on the EW view, it isn't my thing really, and I rarely mark up an EW count on a chart.

I know that elliot wave counts are anathema to a lot of my readers, but like any form of analysis you get the best results from the best practitioners and I have a lot of confidence is the ones I follow. The shallow retracements on trendline breaks that we have seen on the current move up from the mid December low are also strongly characteristic of wave 3 moves I've seen in the past, so the overall thesis is reasonable, though I don't much care for the idea that SPX is going to rise much higher, as that seriously weakens the case that we are still in a bear market:

Dead Cat Bounce? (by Springheel Jack)

We've been having a lot of days where the low has been made about 10.30 and equities then rose for the rest of the day. Yesterday broke that with a bounce that petered out and then drifted downwards until the close. That doesn't mean that we've seen a top, but it is a change in the character of the market. On ES we have broken down from last week's rising channel into a shallower one. A break below channel support in the 1280 area would look immediately bearish. Channel resistance is in the 1308 area: