Retest of Recent Highs

US Markets

My observations below should be viewed as general advice and may not be right for you.

US stocks got off to a rather weak open due to bearish global economic data and losses in European trading. However, after making session lows in the first 30minutes right out of my key 1450 level, the major averages set off on a day-long climb towards positive territory. As a result, the S&P 500 finished flat and the Dow Industrials closed in positive territory +0.14%. We have seen continued follow through in Asia today with the Emini S&P500 futures up almost 5points.This is a bullish reversal indeed.

As I said yesterday,

“I continue to focus on the short term support zone at 1450/1455 in the S&P500. As long as this zone can hold, I believe a retest of the recent spike highs at 1475 is likely before a more meaningful bearish turn. The bigger picture trend remains up with a strong breakout above the April 2012 highs.”

This played out to a tee last night with strong buying at the 1450 zone. I do believe there is potential for further gains into the previous highs to finish the week and coming into Triple Witching today. This is the expiry of stock options, index options and index futures. Usually the market is rather well supported into this event.  I am also seeing short term bullish setups in Gold and the Australian Dollar which implied continued strength into the weekend.

S&P500 15mins:

This is the short term range and support zone I am looking at. The support zone provided a great buying opportunity for trend followers and short term traders, and this opens up a retest of the recent spike highs tonight at 1475/1480.

S&P500 Daily:

The Market remains in a strong uptrend having broken out above the recent April highs. 

S&P500 2010 Daily:

I have shown this parallel scenario a few times of late. As can be seen, when the S&P500 broke out above its previous highs and the Double Top zone, a strong trend higher ensued. We are seeing the same kind of price action and setup currently. 

S&P500 Emini Key Levels:

Support Levels: 1450/1455, 1410

Resistance Levels: 1475/1480 1500

Europe

European stocks were slightly weaker on Thursday as lacklustre global manufacturing and labour reports compounded worries about global growth. 

The Stoxx 600 index of European shares fell 0.2%, to 274.50. Germany's DAX shed 0.02%, to 7389.49, France's CAC-40 dropped 0.6%, to 3509.92, and the U.K.'s FTSE 100 lost 0.6%, to 5854.64.

From a technical standpoint, The Eurostoxx does appear overextended on the Daily chart and is struggling at the key 2600 level. However, on the short term timeframe the trend remains up and I see a consolidation pattern with a breakout to the upside likely. In sum there is the potential for more gains into 2600 and above but the uptrend is tiring. I think a period of consolidation may be needed in the bigger picture before a strong breakout can occur above 2600/2625.

Eurostoxx Daily:

The market is retesting and struggling at its previous highs. 

Eurostoxx 15mins:

There was an attempted breakdown early in the week which failed to gain momentum. Price looks to be consolidating with the potential for breakouts tonight into 2600 and beyond. 

DAX 60mins:

Grinding higher with the potential to breakout into 7500. 

FX Majors

It was all looking rather weak for the Aussie yesterday with the price breaking below 1.04 after Chinese manufacturing declined for an 11^th month, clouding the prospects for the nation’s resource exports. However, despite breaking through 1.04, the market failed to pick up any additional selling and price recovered to close at $1.0436 in New York. This was encouraging to me and indicative of a “failed breakdown”. There were a number of sell stops under that 1.04 level which appeared to shake out weak hands. The Australian Dollar has gone from strength to strength in Asian trading and is now at $1.0470

From a technical perspective, as long as the Australian Dollar can hold above last night’s lows of 1.0380, I believe there is potential for continued strength and a resumption of the uptrend. Confirmation will come on a breakout ABOVE 1.05 as I stated yesterday.

AUDUSD Daily:

Price remains within this big picture triangle pattern. Last night’s reversal looks strong and this could be the prelude to a breakout above 1.06 in time. 

AUDUSD 60mins:

A failed breakdown through support. I show a “Head and Shoulders” pattern here which many traders highlighted yesterday. To me, these patterns very rarely work out. The inability for the market to breakdown through 1.04 is a sign of underlying strength and a potential bear trap as shorts have now been forced to cover. 

NZDUSD 60mins:

I showed this setup on twitter last night. There was a great reversal right out of the support zone. A breakout above 0.83 should confirm a new leg higher. 

EURUSD 60mins:

A potential 3 wave move into support last night. This implies a breakout and retest of the previous swing highs in coming days. Breakouts ABOVE 1.03 are needed for confirm. 

Commodities

There is a great looking breakout pattern in Gold tonight. We are not far off my bigger picture target levels but for now traders should continue to follow the trend until we see a clear topping pattern or exhaustion. This is not the case currently.

Gold 30mins:

A short term triangle pattern with a breakout triggered above 1780.

Gold 60mins:

The trend remains up and price continues to respect the upward trendline with precision.