Chicagostock Trading

As seen in the weekly chart above, the 30 year bond has fallen back beneath its long term resistance from the January 09 to the September 11 highs.  The market attempted to hold above however overbought conditions with the new high in July at 15311, the bond did it's best to squeeze as many sellers as possible. Since this high, the market has rolled back beneath its resistance trendline, failing to hold prices above 14900.  The move has brought the market back down to where it broke out May of this year, just as the SP500 clipped the May highs of 1411.75. Stabalization can be seen here, however rallies up to 14900 offer sellers an area to defend with stops above 15311 to look for these recent lows to be retargeted, followed by a test of the year lows at 13505.

Since the Japanese Yen completed its downside target of 11900 in March of this year, the market grinded back higher, squeezing late sellers, leading to a retest of the year highs and late last year highs.  Over the past several months as the Yen rallied up to 12881, the market stalled and has begun to roll over.  Aggressive sellers have already taken advantage of this move by fading the highs and covering most positions. However looking at the weekly picture, this retest of last years highs appears to be a potential right shoulder of a larger head/shoulder formation.  There is a double bottom at 12416 where a breach of can confirm this right shoulder and see sellers attempt to drive the market down to retest the neckline of 11900 that the market bounced from earlier this year. At that time it was not ready to take out its support of 119-117, thus the short squeeze into retesting the highs. This is the target on the downside with a break below targeting 11375 which retraces the market back to where it broke out during the flash crash of 2010.

September crude oil contract ran up to highs of 94.90 today with only 5 days remaining for the contract to trade with it's expiration nearing on August 20th.  The move approaches the 9750 target which retraces the market to where it failed May of this year.  With the contract having to go into another roll and only $3 shy of its upside target, it is good enough to finally close out the runner position from 7840.  This contract already had to go through a roll from August into September and with the close of September, the two contracts combined have paid a total of 15.87 on this runner position. More then the first two targets combined which netted 11.35.  There was no risk on the runner after taking profits on targets 1 and 2 and allowing the 3rd to run with a stop at entry, however the trade has completed for a total of $27.22.  

Going forward, 9750-10643 is a major area of resistance for crude oil to work through.  Moving past this range retraces the market to where it failed in May, making a U turn on the weekly chart, where at this point consolidation would need to be seen to build a base and target the year highs above 110.  Until then this is speculation and we need to see the market trade through this major resistance range of 9750-10643. Downside support is seen 8936-8684 and down to 8530.

Reference: How We Played Crude

 ^ Earlier this year, lumber prices showed signs of life as the market was knocking against 260 resistance after 6 months of building a base in late 2011.  The breakout above 260 took place in February of 2012 and the market turned this old resistance into new support.  Consolidation was seen holding above 260 as the market worked higher to complete its upside price objective of 311, retracing the prices to where they broke down in March of 2011 with highs of 324.7. 

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Following last Thursday's "Draghi Sale" as the Euro fell down into lows of 12140 which retested the July lows, the market has sprung back as buyers stepped up to defend this low and sellers failed to break the range. A right shoulder developed with this move and the market is back to testing its neckline of 12417.  The move in itself has given brave buyers of the Draghi sale oppurtunity to have locked in most profits and now allow runners to work as the market attempts to chip away at this neckline.  Shorts in the market are now trapped as the market failed to move lower and the squeeze against the neckline puts pressure against these shorts to cover.  Moving past this resistance gives room to continue the squeeze and use shorts as the fuel to move past the 12051-12417 range. The inverted head/shoulder targets the June highs of 12759, putting the market against its 100 day moving average as well as the top of its daily channel.  Failure to attract buyers above 12417 and a move below 12140 is needed for bears to regain control.

Following the 1319.75 lows made on July 12^th as the market retraced lower to test its breakout point on the 29^th of June, the Emini SP500 has held this level of support to break out of its handle formation off the highs of 1375. This breakout has led to a 100% retracement back to 1375 as the market has squeezed out this high.  As noted in our market update on June 26^th, we believed the pullback offered buyers opportunity to defend the market as the rounded bottom in the CUP was forming, followed by our post on July 12^th as the handle was being formed identifying the 1328 level as support.  With the market now at 1375, this rewards those brave buyers by giving opportunity to take money off the table as 2 of the 3 targets are complete, 1348 and 1375.  Going forward, buyers can now run positions with their stop at their entry levels at the 1328 level and let the market attempt to complete its upside target of 1422.  This move past 1375 confirms the cup/handle formation, however the next major resistance comes in at 1390 which retraces the market to where it failed at 1411.75 in May.  Rather than buying at these levels, by stepping in and buying the breakdowns seen over the past few weeks, this has rewarded runners to do the heavy lifting through these major resistance levels. Sellers will be defending 1390 at all costs as this is the last level of defense where if fails, the highs of 1411.75 will be taken out, giving room to complete the upside target of 1422 and attempt to extend into 1441 being the May 2008 highs that saw the reversal into 665.75.  Failure to push through 1390 and a move below 1319.75 derails momentum.