Chicagostock Trading

Chicagostock Trading

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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SP500 & Nasdaq Back to Bottom of Rising Wedge

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The struggle to top since the first correction in May from 1685-1553, being the most violent of the year, led to higher lows and higher highs as new highs squeezed shorts and every dip became more and more shallow. Buyers continued to pile into these dips making them more shallow, afraid of missing "the next leg up". This recipe is what makes the rising wedge, and a recipe for disaster as bulls and bears make money, but hogs g slaughtered. Thus far the surprises from the Fed on "no summers" and "no taper" have held as the highs as shorts capitulated into 1726s and market gave it all back the following week. Bulls have another opportunity to make a higher low here as the market comes into this support line from the June lows. Failure to hold the August lows of 162475 break the wedge to give way for a test of the June lows to confirm the failed higher high up to 1726.

 

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Nasdaq chart shows breakout above rising wedge to squeeze shorts and move back inside wedge to retest support.  This can lead to a water fall effect with confirmation of top on a break of 3055.

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