The break up yesterday on the SP500 Index above recent resistance would appear to suggest further gains ahead. Last week I highlighted a number of Bullish Technical Factors supporting the SP500 (Can be seen by clicking here), the breakout of the Neckline of a continuation inverted Head + Shoulders pattern further bolsters this. - Key now will be to see how this performs in the wake of this breakout, I still suspect that we may see a pullback in the next week or so after a probable further push higher, possibly to the neckline of the breakout at 1132 on the SP500, or I suspect perhaps deeper to the gap underlying the the recent consolidation around 1110-1113. - If this occurs, then subsequent price action on this pullback will provide a strong clue as to future direction. Bigger picture I favour a return to the highs of April 2010, if however, the pullback makes a successful break below the 1110 gap, then I may have to reconsider.
USDJPY FX
After last Wednesday's intervention inspired rebound on the USDJPY from a low below 83.00 to almost 86.00 the USDJPY has been consolidating just below 86.00, I still feel a stronger rebound remains a possibility. The pattern on the weekly chart supports this, the past 3 weeks has formed a Bullish 'Morning Star Pattern'. This can be seen on the Weekly chart shown below: Note how the entire downtrend from late April began with the Bearish form of this pattern, a Bearish 'Evening Star Pattern'. Dec 2009 also produced one of these patterns. I also refer back to the analysis I produced last week whereby I noticed a similarity between USDJPY recently and the period in early 2004, this can be seen by clicking here .
Thus far the USDJPY has not yet re-tested the breakout around 84.70, I do not rule this out before this makes further headway, however it is possible that a re-test may not yet occur and the USDJPY forges ahead, this will grow more likely on a sustained break over 85.90/86.00. The daily chart below shows the key resistance around 85.89-93.
BUND FUTURE
The following chart shows the Bund Future (German 10 Year Yield inverted) daily candle chart. The past few weeks have seen a significant retracement of the major June/July rally. Currently I feel this move is an on-going correction, I feel that there may be some further room to run on this move. If this correction does run further, then I have highlighted some levels where I feel this may run to, I have a cluster of supports around 128.20 - 128.45, with a key level just over there at 128.70. I am however keeping an eye on a possible breakout of a Bullish 'Flag' pattern on the US 10 year note future ( I will highlight this on the next chart) should this happen it is probable that the Bund would get dragged higher too, if that proves to be the case then the downside may not have much further to run on the Bund future.
US 10 YEAR NOTE FUTURE
The following chart shows the 10 Year Note Future continuation daily candle chart up to last nights close. I have highlighted what I believe is a Bull Flag pattern, this is a continuation pattern, a successful break of this pattern should see a further resumption of the strong rally seen over recent months. Note, this morning the T-note has broken above the upper flag line, however I would prefer to see whether the move is valid in US trading hours. Also, at the risk of missing a big move, I would like to see if any break can hold for a couple of days.
AUDUSD FX
Finally the AUDUSD, this broke above its key resistance of the past year. If this can now hold this break through the week, ideally over 93/94, then this suggests significant gains ahead in coming months for the AUDUSD. - A failure in the wake of the break of resistance could however be a signal of a deeper retrace. though for now I consider this the lesser probability. Weekly momentum studies are supportive, though shorter-term studies suggest immediate further headway and some consolidation are perhaps likely.
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