The following weekly chart shows a trend line that I first saw in last week's edition of Peter Eliades' Stockmarket Cycles report. Wow. Looks to be hugely important. By the way, I never cease to be amazed by the charting and cyclical insights featured in Stockmarket Cycles. A must read for me.
The above chart is arithmetic scale, in contrast to all my recent S&P charts which have been log scale. The difference in chart scales is my (poor) excuse for not seeing the line with my own eyes. Once upon a time I used to regularly check charts in both scales, but unfortunately have lost the habit (*kicks self in backside*). Needless to say I will happily use charts of either scale in my analysis and trading, whichever is showing the neatest trend lines and trend channels.
I like to say that there are two sides to a trend line, meaning in this case that the market could be repelled by the above trend line and turn lower, or it could burst higher through the line. I think that a move through either last week's high or low will be a key indicator as to which of those options the market is taking.
If the bullish scenario unfolds with a break through last week's high, we may see the final blow off top scenario that I have described numerous times. For anyone who missed it, the following log scale weekly chart illustrates a possible megaphone top, where ideally a final rally would top at the upper trend line, around 1800. And yes, these are the same trend lines as shown on the above arithmetic scale chart - amazing the difference that chart scale can make!
Why a "final" rally? The following monthly chart supports the case that 1800 is likely in a key resistance zone. 1800 lies just beyond the illustrated resistance line at 1785, which is the level that the S&P would beat the 2007 high by the same percentage as it beat the 2002 low at the 2009 low. Until 1785-1800 or so is beaten, I am of the view that the S&P remains in a giant trading range, and will eventually be drawn back down toward the 2002 and 2009 lows.
Monday, 29 July 2013
Daily chart shown. Silver has today rallied from a test of short term trend line support. However until it beats last week's high the trend at this time frame is down. A break of today's low would likely clear the path to a retest of the June low.