Three Charts to Watch

A bit of a hodgepodge of charts to review. I'll start with my favourite of the bunch: the relationship between oil and gold prices. Peaks in the relative price between these commodities have historically provided swing lows for commodities - oil in particular. Certainly, sufficient time has passed between peaks to mark a major low.

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Indices Breakout - Head-and-Shoulder Reversal in S&P Negated

ECB action ruled Thursday's action across global markets and currency pairs. For many indices, it marked a pause in the New Year decline, but many of these same markets remain range bound by December's swing lows and the end-of-year highs. From a trend perspective, nothing has really changed.

The S&P finished above a converged, yet flat-lined 20-day and 50-day MAs. There was some technical improvement with a fresh MACD 'buy', and a marked accumulation day leading to a 'buy' for On-Balance-Volume, but whipsaw risks for each of these signals remains high. Bulls would probably be best served by some tight action just below 2,100, then a break higher. It does look like the bearish head-and-shoulder reversal is done, at least in its prior form.

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Semiconductor Index Phase II Breakout

There were small gains, but again it was the Semiconductor Index which had the best of the action. It inked a second, modest breakout, but there is still another declining resistance level to go before it starts challenging highs. Watch for a MACD trigger 'buy'.

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Semiconductor's (Very Modest) Breakout Phase I

There wasn't much on offer by the close of business as early losses were returned by the close. The Semiconductor Index may have had the best of the action, although the relative gain was small. The index crept over declining resistance, but has another resistance level to challenge soon. Support at 659 remains in play, but if it breaks it becomes a shorting opportunity.

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Big Gains on Modest Volume

After the sequence of selling, it was no surprise to see Bulls make a comeback. Friday's volume was relatively light compared to the day's gains, but some indices are well positioned for a further advance.

Best of which is possibly the Semiconductor Index. The index rallied from converged trendline and breakout support. Buyers can use Friday's low as the risk level for a bounce. There are a few declining trendlines to break, but if these go then a retest of 704 is next; first trendline will see a test on Monday's open.

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Neckline Breakdown in S&P

Selling returned for another day as the rising neckline connecting December and January swing lows in the S&P broke lower. Volume climbed to register a distribution day, continuing a sequence of increased volume selling. The December swing low is the next level of support and is looking like a required test.

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Decent Afternoon Recovery in S&P

It was looking tough for a while, but markets managed to claw back early afternoon losses. Bulls will be happy to see late afternoon buying which has the chance to follow through on Thursday morning (or premarket).

The S&P returned to neckline support, although troubles are likely to re-emerge when it gets back to 2,064. It's not a particularly attractive long here, but shorts will have been repelled for a while. There is chance of a double bottom, which will require a break of the 2,060 neckline to confirm. Note that any such break would also negate the bearish head-and-shoulder reversal

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