globlchrtanlysis' Blog : What to Look For on Monday

Here was the report for Monday before the announcement by China to unpeg their currency to the Dollar. Now we should see a huge move in commodities and potentially our market but it is tough to know how to play this potential big gap higher. We don't like to chase. Looks like we may get our first test of overhead resistance sooner than we thought and this will show us how much conviction to have.

The major indices have now pierced through resistance areas and have stuck their landings. It’s actually quite interesting to see what small ranges we have had over the past 3 days after having such large daily trading ranges the prior week. Regardless, this is healthy consolidation action above support and the longer we hold these lines the better our odds get when entering into new long positions.

Here is what we are looking at now. The positives are: We have broken above the downtrend line from the May highs. We held the Feb and Flash crash lows and those may turn into support going forward. Volume patterns are decent.

The negatives are: We are about to hit resistance at the downward sloping 50 day moving average and above that we have the old January 2010 breakout area which could also act as minor resistance. This could send the entire market lower over the short term with the potential for buyers at the 21 day moving average and the top of the down trend line. If any of these levels hold we could potentially complete the classic 1,2,34 bottom pattern which would be a huge buying opportunity. Let's see how this scenario plays out and we can hopefully start dipping our toes back in on the long side with some high probability setups.

The Russell 2000 led us up now peeling back at resistance

NASDAQ-right at resistance

S&P 500-holding the 200 day moving average but right below resistance at the downward sloping 50 day MA

Dow Jones-Same as the S&P 500


The other important thing to keep a watchful eye on are the problems the Euro zone is still facing. Those issues have not only led to a near record decline in the price of the Euro vs. the US $ and other currencies but has also led ours and the rest of the world’s markets lower. The Euro/US$ has bounced off the $1.18 and change level and is now hitting the zone where the shorts will look to add to or reset their positions. The 10 week and 50 day moving averages have acted as serious resistance levels since January of this year. We are once again at those resistance levels and are also bouncing into the old 2008 lows. This confluence of resistance levels could send the Euro and the rest of the markets lower to test support once more. We would be surprised if the EUR/USD could make it's way through this resistance level the first time but if it does we could see one heck of a pop as shorts cover.

EUR/USD



Thanks,

www.globalchartanalysis.com