Once again the bears are ending the day in disarray and with broken hopes. Instead of breaking the critical sp'1598 low, the market has put in a 'marginally higher low' at 1608, and now looks set to challenge and break the recent high of sp'1648. Poor bears, I do sympathise.
sp'weekly'8 - another higher high..before Aug/Sept weakness
sp'daily3 - fib levels
Well, this time yesterday the Nikkei was plunging..the US futures were on their way to testing the sp'1598 low, and the bears were looking forward to an exciting day.
For over four years now, such hopes have been regularly smashed to pieces..and today was just another classic instance.
Even worse for the bears, we actually opened a little lower on the indexes, with the sp' hitting 1608 in the opening 30 minutes. Those on the short side should have at least tightened their trading stops at the open..but no. I can only guess how many retail day-traders got nuked today, as they saw winning positions turn into significant losses.
Bigger picture - another higher high to come
With today's marginally higher high of 1608, I think that secures a near term floor, and the bulls are back in business. So long as the FOMC do not spook the market next week, we look set to rally one further wave higher, taking out 1687, and breaking into the 1700s.
A simple fib' extension of 1.6x - from the 1598/1687 cycle, is offering the bulls sp'1740s by late July. I think that is viable, hell, its not even 10% !
I'm then looking for a fall of around 8-10%...ironically, back to where we were this morning. Its very possible we'll then see another major wave higher, one that could take us into spring 2014. However, that is probably looking too far out.
First things..first. Lets see how the market performs in a challenge of 1648, and then 1687.
Like today, there is an array of econ-data, producer prices, current account, and industrial production. The market will probably place most emphasis though on the consumer sentiment data - consensus is for 84.5 - which is probably a bit on the high side.
There is no significant QE this Friday. However, there is a huge QE next Monday of $5-6bn, so bears should remain very cautious about shorting into the weekend.
*My plan for tomorrow...I will look to maybe pick up a small index long block - if we open lower (for whatever reason)..and exit later in the day. I think there is a reasonable chance for a day-trade, with hourly/daily charts all pretty much back to bullish again.
With futures (as at 10pm EST) sp -10pts, we're set to open around 1626. I've added a fib retracement for today's rally, to the 60min chart...
Perhaps we'll retrace early Friday morning to somewhere in the 1627/23 zone. Further, the sp'1625 level has been important recently, it'd be a logical 'minor down cycle' floor, by 11am.
Goodnight from London