Chicagostock Trading

Chicagostock Trading

SP500 & VIX

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The SP500 completed its 181250 melt up target after breaking out of its 177450-173650 trading range.  This range of 38 handles was expanded to the upside, giving the 181250 target after the SP broke through the top of the channel at 177450, followed by turning the level into support on November 20th.  Since touching 181250, the SP started the month of December on a softer note.  These highs were retested, only to fall short at 1809 before reversing to take out last week's lows.  Melt up continues with support at 1794-177450 holding.  New resistance based off most recent highs comes in at 1802 with buy stops above 181250 to give way into next fib extension at 1818.29.  Breach below 177450 confirms a short term top to give way and target the bottom of the range at 173650 to shake out the long side.  Breach of 173650 gives way to then expand 38 handles the opposite way, giving room down to 169850.  As of current, the SP500 is up 392.5 for the year, or 27.6%, with 9 months in 2013 as green months, and only 2 months of corrections.  Last month of the year, we will find out if Santa Claus looks to book some profits.

 

 

 

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Volatility index giving some warning signs.  After taking out a long term support trend line from the March lows, falling down to 11.99 last month, this quickly turned into a head fake as volatility squeezed back to 13.94.  This first attempt to squeeze 14 resistance failed as volatility retreated to retest the 11.99 lows, finding support which has led volatility to now break out of 4 week highs, confirming the 11.99 low as a failure. New support now seen down to 1330, followed by 1290. Weekly close above 1436 gives way to expand 1436-1199 (237) up to 1674. For the year of 2013, the VIX has a trading range of 11.05-21.91 and 18.00 to be flat for the year.

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DAILY EQUITY CHARTS FOR NOV 18 2013

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2013: SP500 +25.6%, Copper -13.7%

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Copper VS SP500 spread breakout above 40 to start 2013 now up 45%.

For 2013, the SP500 is up 25.6% with copper down 13.7%.

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SP500 & Yen

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As seen above, the SP500 has enjoyed higher lows and higher highs ever since its biggest correction of the year.  This correction attempt started in May, dropping the SP from 168575-155325, 7.9. Since then, we have been in this trend where higher lows have been made as pullbacks become shallower with buyers chasing the market up, and higher highs as shorts have been squeezed with the market taking out the previous highs.  Anytime someone is forced to chase a market, it never ends well. The latest squeeze came as the market pivoted off 1640 and ran in the face of a government shutdown and the constant debt ceiling debate.  With the September highs taken out, highs of 175450 were made this week on the NFP number release, pushing the market above its rising wedge, and testing fib extensions of 1740-1749.  Wednesday attempted to see a pullback only to see the market saved as it held 1736 which has the market back to pressing the highs of the week.  This is consolidation taking place as the market attempts to take a breather, yet continues the pressure against shorts and forces buyers to pay up.  Push through the weekly high sees the next major resistance levels coming in at 1776 as a 100% fib extension, along with 1783 as a 50% fib extension based off the year low to the September high and October low.  Falling below 1736 as a healthy market should, would give way to retest old resistance at 1710 and attempt to build new support. Without this happening, it forces buyers to continue to pay up, which gives way for them to chase these highs and next fib levels to be tested.  The trend of higher lows and higher highs since the May correction has not only seen buyers desperate to buy every dip, but also brought major pain to short sellers in attempt to clear them out of the market before the carpet is pulled from underneath.  The second half of the year remains in a "bullish bias" and any pullbacks down to 1620 would give buyers a major area to support this bias and keep the momentum. The question is if there will be any buyers left after the market has forced them in with this rising wedge.  It will take a period of 7 closes below 1620 to reverse the bull bias and give way to target the June lows for the rug pull and move to fill the gap that began this year down to 1420s.

 

 

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As the SP500 hit a top in May and pulled back, the Japanese Yen in contrast hit a low and squeezed 10 handles off the low.  This was followed by a pullback to retest the lows, and ever since then, as equities have gone higher, the Yen has traded sideways and compressed as the 200day moving average on the daily chart has caught up.  Since the Yen's original move was from 126 - 96, it is in a bear trend and this sideways action is consolidation of the trend and an attempt to reverse or see continuation of the trend.  Currently, the Yen is retesting the October highs of 10357 that rejected the test of the August high.  As this spring is compressed, a move above the October high gives way to reclaim 104 and force shorts to cover, giving way for a retest of the June highs at 10663.  Reclaiming these highs gives confirmation of a reversal in this bear trend and sees room up to 118 to fill the gap created in November of 2012, just as the SP500 has it's gap of 1420 from December of 2012.  Recall the Yen attempted to bottom out at 10340 in March, only to see the Bank of Japan come out with new stimulus that derailed the reversal attempt and slammed the market into new lows down to 9640 printed in May.  The squeeze in June led to the BOJ announcement levels which was rejected. This is a major level as a recovery above this is a recovery in the Japanese Yen. Bottom line, for the week, need to see buyers sustain current bid to see new buyers step in next week and close above 104 to squeeze shorts. Failure to hold above 104 and break of 100 sees a retest of the May lows.

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The American Revolution and the SP500

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The SP500 is back at pressing last month's, keeping the rising wedge of higher lows and higher highs since the May correction.  Putting the market back in the hands of sellers to defend just as a deal on the debt ceiling is made.

The last high at 172675 capitulated shorts above its previous high of 1705 as the Fed surprised the market with no taper and no Larry Summers.  This was followed by a pullback which failed to see buyers materialize inside 1680s as the gap was filled post shorts being squeezed.  Establishing a weekly bearish engulfment and eventually grinding down into lows of 1640 to test last and major support based off the 162475 August low.  Sure enough this held to see the market develop a reversal that was fueled by talks of a deal taking place on the debt ceiling. Shooting the SP 60 points back to retesting major resistance within 1710-1715 from the failed high in September.  Just as the SP tests this major resistance, Congress has struck a deal with less then 14 hours before the debt ceiling was to be breached.  Many are looking for sell the news to take place, and the test of the September highs here is the true tell as to whether buyers can continue to support prices to push through sellers now coming into defend this resistance. For the market to reject this test of the September high, a quick reversal needs to be seen to fall back below 1690 to give way to test support at 1658 based off the 1640 lows.  The longer buyers can support prices at these levels, the more pressure to squeeze out the September high and put in another higher high.  Should this take place, we see next major resistance levels coming in at 1740 as a 76.4% fib extension, and ultimately 1776 as a 100% fib extension.  Keeping in mind the May high at 1685 that led to the biggest correction of the year was also a 100% fib extension.  This would be ironic to see the market reach for this number, the year of revolution/America's birth, just as Congress' approval ratings drop to all time lows and they continue to kick the can down the road with no real solutions on cutting spending or the debt.

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