Time For A Breath?

…My thinking.  $SPX has tagged and closed above 1k (yippee for now), but is in the thick of a small, formidable range bounded to the upside ~1014 (38.2% fib retracement from top to bottom).  That may mean nothing: if not, the way up is tall and thin with little to bump one’s head on until 1122 (50% retracement).  Upside resistance there on the equity side resonates with what I think are the terminal fibonacci extensions to be tagged on this move up for EUR/USD, GBP/USD and GBP/JPY: three of a small handful of pairs I monitor to evaluate sentiment.  I may be all wrong (and I’m guarding convictions with fairly tight stops), but I see some backflow out of EUR and GBP overnight, into the morning.  CPCEPI and Consumption out at 0830ET could catalyze or nullify that projections.

Trades for overnight:

USD/CAD: Long 1.0663, Stop 1.0570, TP 1.0763

GBP/JPY: Short 161.63, Stop 162.40, TP 160.64

EUR/USD: Short 1.4403, Stop 144.73, TP 1.4303

EUR/JPY Short 137.30, Stop 137.92, TP 136.29

S&P 500: Reaction High?

By the look of it a brief pullback is in the offing for the S&P, probably to the neighborhood of 925-930 before resuming the current upswing to ~1000-1015.

Brief Note

I’m in and out, but mostly out this week on vacation doing shorter trips than typical because of the little ones. Posting will resume with the coming weekend.

Still haven’t crunched the final numbers for last week, but it was arguably the best week ever in terms of net return – wouldn’t have thought that would come in mid-July…. I’ve learned enough to never offer myself unmitigated congratulations (there’s always some imperfection to point out in routine), but after eight years trading actively I do know the difference between hubris and pride in legitimate achievement. So maybe I’ll have a cold one for a job well done.

In other news, I scaled out of my token crazy leveraged fun ETF position (BGU) today at 37.58 for about 7 points. May look at getting back in there if I see something suggesting a breakout above the S&P 950.

Until the weekend….

Overnight Trades for 07/15/09 Closed

Everything I trade with any frequency is moving well into overbought territory on the 1H and just about lapsed into that category on the 3H/4H as well.  What has become a relatively unmitigated corrective move is ticking up in strength, and for the moment bullish sentiment is indomitable.

The market crowd seems happy – if a little too apprehensive to be euphoric – and I think there is a general expectation the “upside surprise” pattern ushered in by Goldman earnings will carry forward through most of the earnings season.  With ~30 S&P companies reporting this week, there should be positive momentum aplenty to entice sideliners to bring some sliver of their gargantuan MM holdings back into the game.

Short-term, I see GBP/JPY to ~155.25 before continuing on to 157.75.

Low on time this morning, so I’ll get to last night’s trade results (which I did not post to Twitter this time) this evening….

Picnickers Remember to Bring Utensils but Bear Arrives and Eats Food with Paws Anyway

Well, Q2 earning seasons started off with a tepid spinning top day. Alcoa’s earnings didn’t quite elicit paroxysms of joy, but did impress enough to inspire some to employ nautical metaphors. And, as goes the universal law governing this kind of thing, any market event that can produce poetic flights evocative of lighthouses, rocky shoals and Thomas Kinkade paintings is enough to produce a finish in the black. Which is what we’ve got here.

How about it, then? Occasionally I like to march out the forks and let them have their say. I’m by no means an expert practitioner of Pitchfork analysis (unlike some of the elitist schleps I’ve seen around) but find them very insightful and like to think I’m basically competent in their use.

Looking in on the S&P, there are a few things at work here, all turning on this 893-ish level.

• The 38.2% retracement from high atop the shoulder to yesterday’s ~870 low clocks right at 893.
• The modified Schiff Fork Median Line (ML: middle diagonal black line) cuts in at exactly this level. Often price will approach this feature of the PF on a throwback before proceeding. Inability to attain a touch at the ML would further bolster the bearish case
• 893 was/is the H&S neckline, to which I’ve expected/expect a return move before pivoting lower.

My guess (which I think is probable) is this move up proves very shallow, belying continuation of the Mar-May rally. So as not give the appearance of direction bias…there’s some support-type stuff too.

• The ML of the standard pitchfork acted as resistance for yesterday’s close, but put the floor in under the lower wick on today’s spinning top at 878.
• The 200 day SMA comes in about 882 either provide support or resistance…we’ll see support for today. Truthfully, I find round number MAs banal and get damn sick of hearing about them from pseudo-technicians who’ve had their net portfolio value sliced to a fraction of former size. But getting sick of hearing about them means there’s a great reason to listen.
• Oh yeah, and 880ish formerly functioning as significant resistance until the market flipped it over to support.

The overlays in green and black are Pitchforks: green is a standard PF, while black is the modified Schiff PF. In these cases, the early June high at 956 (Head) is chosen as P1, the subsequent swing low to 889 (trough) serves as P2 and the following swing high at 930 (right shoulder) is P3. A normal PF runs lines in parallel embarking from those points. The modified Schiff (I’ll let you do the legwork on how this is “modified” and “Schiff”) uses the same reference points, but relocates P1 by plotting it at the nexus of a vertical line drawn from P1 and horizontal line draw from P3. I find modified Schiff to be the most reliable of the three major ML variants.

Try PFs out: MT4 and a number of other charting programs have an automated PF tool. It’s one of the few things Oanda does not have that I really miss. The single best resource regarding PFs is Patrick Mikula’s The Best Trendline Methods of Alan Andrews and Five New Trendline Techniques, info. about which can be found elsewhere online.

Meanwhile, GBP/JPY and GBP/USD developed morning star patterns over that last few hours, but are showing little follow-through during the pre-Euro doldrums. GBP/CHF likewise looks attractive if it can muster the strength to move above 176.80. Rare affliction here called “GBP concentration syndrome”.

Upside Reprieve for Equities, Crosses?

Yesterday’s spinning top on the S&P pulled back to close at the 880 mark, almost giving a doji star after a long marubozu candle Tuesday extend the correction from 930. With Alcoa (AA) posting an upside “surprise” Q2 EPS of -$0.26 versus -$0.39 estimated (did I already say “surprise”?) – and hosts of green shoot junkies becoming apprehensive about lower highs and an 8% pullback off the 06/12 high at 956 – the impetus is here for an up-day.

My thoughts are that the S&P will move back to ~893-895: this is the neckline of the H&S top created with swing highs at 05/08, 06/01-06/10 and 07/01. This is also the horizontal resistance level left by the trough between the head and right shoulder on the aforementioned H&S, and is the median line for a modified schiff fork plotted off the head, trough, and right shoulder extremes.

The correlation between equity down-drafts and flows into risk-averse/haven currencies (USD, JPY) has remained very tight for the last week. I expect that to continue and that we’re seeing a substantial retrace of yesterday’s move.

Silly fundamental histrionics not withstanding, I think we’re in a fundie-driven return move to the H&S neckline and will see a resumption of the decline, with a price target of 820. Also expecting xxx/JPYs (USD/JPY perhaps being the exception) to sync up with that progression.

I’ll try to post some charts later, especially of that “Schiff fork” thing I mentioned.

The Fizzle Point

I fizzled out in early March: inexplicable, terribly sudden disappearances are a bad habit of mine. But really, it’s tax season, though it isn’t about my own taxes. I’m not a CPA, and I do not work at an accounting firm. I’m not a quasi-CPA, bookkeeper, in payroll, etc. All the same, though…. Anyway, I think my spate of early-Spring sinus infections has ended, and my blogger batteries are recharged. So, until they die again….

This is a bit different: every now and again, I dip into the equity side of things, especially as there is occasion to call a reversal and gratify a barely latent desire to prove I’m right that is constantly nagging at me. Well: that’s only half-true.

A few things of note:

The next round, psychological markers occur at 850, 900.

Fibonacci Projection is the topic of the red Fib levels on the right side of the chart (ignore the blue fib levels, though they are an example of the same thing). The red fib lines in the middle, from 800-933 (real body low – real body top) measure a swing low to swing high. The red fib lines are a projection that correlates to the previous move: in fact, you’ll notice 681-816 (again, real bodies, on the weekly) is almost exactly the measurement of the previous swing. Taking the symmetry of those moves as an embarkment point, we can project likely reversal points on this move by measuring 127.2% and 161.8% of 133 (or 135) points. These projections hit at exactly 850 and 900.

AFP registers lower forkline resistance at ~850, median line resistance in the 900 neighborhood.

And (not pictured here) 78.6% fib retracement for 875-666 comes in at 830, a couple points away from where the index topped out Friday (that correlates to 7920 on the $DJIA).

There are a few positive divergence-type items around that make this a little tentative (the time to get very uneasy is when all points of your analysis are completely unanimous), but I do think the best staging point for bears to bring supply back in falls between 830 and 850-900. That’s a broad range, so if pressed I’d collapse it to 830-850ish. Unless there’s significant dislocation to the upside, this remains a bear market rally that I think is just about spent. Above 900 would cause some real head-scratching, and the corrective scenario isn’t really called into question until 1015+.