Charts I’m Watching: February 10, 2012

UPDATE:  3:55 PM

The NDX RSI trend line was broken on the daily chart.

VIX to 21.98 intra-day high, up almost 40% this week.


VIX has broken out of its falling wedge.  We should see some sort of backtest, which will establish a right shoulder in an inverse H&S; pattern, then a run up to 25+.  Note that each target which is fulfilled on an IHS completes another, larger IHS — in a reverse waterfall of ever-increasing values.

I wrote about the same pattern last July, just prior to the market imploding [see: Do You Feel Lucky?]

But, an IH&S; pattern on VIX wouldn’t be worth much without a matching H&S; pattern on SPX, though, right?  Here’s a little one worth watching:

Of course, little ones can turn into bigger ones…

Which can turn into really, really big ones…

More later.


The trend line from May 19, 2008 through May 2, 2011 and yesterday’s close.  Note that it connects the wave 2 top in 2008 to what I believe is the wave 2 top in 2012 — kindred spirits, if you will.  Thanks, again, to RS for pointing it out.


AUDUSD charts, relating to discussion below…


Charts I’m Watching: February 10, 2012 — 8 Comments

  1. Yup, I've got that trend line on my daily chart as well as the three trend lines that followed, each one being steeper than the one previous. The lower one that you highlighted is going to be the key trend line I think. But before price hits that trend line it's probably going to tangle with the early December peak in the Aussie… somewhere near 103.25/103.75.

    I totally agree with you that the weekly charts of the indices are just flat out bullish at the moment. I'm not ruling out the possibility of seeing those turn south in a hell of a hurry though, without any negative divergences (if we are still in a secular bear market). If we are, then bear market rules would be in effect, in which case overbought signals would no longer be ignored, but should be acted upon (go short). The problem is that at this point in time, we don't know which it is. The weekly charts are bullish as of tonight… I guess we have no option but to accept that. There's no point in fighting the trend, and until those weekly charts turn lower, I guess we just have to accept it for what it is.

    All the best bud.

  2. Hey AR, thanks for the input. Can't argue with your weekly chart. The same situation exists for all the indices, IMO. There's the distinct possibility we're looking at a pullback before another run higher — though ideally the next push would come on lower RSI and MACD and set up some nice negative divergence.

    There's another chart worth watching on AUDUSD, which I've posted above. There's a nice fan line off the Mar 09 lows that tags current prices pretty well if you ignore the Oct 27 spike. Only thing is, the last push in harmonics came up short of the .886, so it seems unfinished to me. There's also two RSI TL's coming up that could offer decent support (marked in white circles.)

    I'll withhold judgement until AUDUSD can get below the dashed yellow and red trend lines in price. Cheers.

  3. Financial media are reporting that the Greek cabinet have approved the austerity measures required to secure the funding for Greeces' debt payments thus implying that so long as it passes through parliament on Sunday then all is well, HOWEVER…. most are FAILING to report that it does NOT include the extra 325m euros required to get the funding.
    That is the next and bigger stumbling block.

    This whole saga is now beyond laughable and has become PITIFUL!

  4. Hey there Pebble. Thanks for another outstanding set of charts and for your thoughts. I just wanted to submit a link to a post I've got going for any of your readers who might be interested in following what's happening on the currencies front. I've been adding charts to it daily and it's one of those posts that's likely to keep growing for quite some time to come:
    Currencies, Crosses and Implications – An Ongoing Discussion

    As you're so well aware, we can get some great clues from the currency arena and in my opinion the Australian dollar issued a sell signal today (sell equities too). Mind you, at the close of this week, the weekly chart of the Aussie dollar still looks quite bullish so we have little option right now but to consider that the sell signal issued today on the daily chart is possibly only identifying a pullback and not "the" top in that currency. Kind of sucks for those of us who are bearish but we have to be realistic about this particular metric and not jump to conclusions just yet.

    Having said that, if we are indeed in a new secular bear market for the Aussie dollar (and therefore equities), the weekly chart will head south with a vengeance. A bit late, but it won't make any deke outs. It'll be one of those "we'll know it when we see it" kind of deals

    Have a great weekend pardner. And thanks again.

  5. Ah, I'm new to EWT. I was wondering why that particular trendline would manage to stop the rally in its tracks when all the previous ones failed. Interesting that a previous Wave 2 trendline would stop our Wave 2's.

  6. Nice catch, RS. Yeah, I've been wondering if that would come into play. For readers who are wondering what we're talking about, this is a trend line from May 19, 2008 — the wave 2 top back then — through our most recent top (May 2, 1370) to today. What's remarkable is it's precision. It starts at the May 19 intra-day high, tags the May 2 intra-day high, and lands precisely at yesterday's close. I'll put a picture of it up above.