Waiting to Fade Rallies...

S&P 500: 1,340 is Support for now, below that, 1,290 should provide a second layer of Support. I expect 1,340 to hold, as there is confluence of support there in the form of the, Lower Bollinger Band, 23.6 Fibo of the entire rally since Oct’2011, former Range Support and Ichimoku Cloud Support.
A Daily Close below 1,340 over the coming sessions could put the focus on 1,290, which happens to be the Wave 1 Top. (meaning Wave 4 cannot overlap this level). Previous Downtrend Resistance Trend line now turned possible Support also happens to be in that price vicinity. But this level is still a long way to go and may possibly take a month to get there. For now, lets just see how price action plays out as we approach the 1,340.

Shanghai Composite: Going back a little further, since Apr’2011 the index has been in a steady downtrend from the 3,040 level. With that in mind, current price action is fast approaching the 38.2 Fibo of the entire rally down from 3,040 to 2,130. Watch 2,480/2,500 zone for Resistance. Above that zone the 2,600/2,650 level could provide a second layer of Resistance which happens to be the 50% Fibo of the downtrend from Apr’2011 and the current larger trend Channel Resistance. The second layer of Resistance is still a long way to go. Stay focused on 2,500 for now.

Bottom Line: close to 90% of Traders are Bearish. That itself is a Bullish sign. We may see some upwards correction in Risky assets for the near term and perhaps even the mid term. I will not chase these Risk Off moves but instead, will wait to Sell on Rallies towards Key Resistance. Based on my Seasonal Chart studies, declines made in May are usually reversed in June. Therefore if you haven’t secured a good price for your shorts yet, don’t worry, it is better to Sell in June.

Currency Watch List

Aud/Usd: I expect this pair to follow the Shanghai Composite closely.
Eur/Usd: I expect this pair to follow the S&P500 closely.
Gbp/Usd: this pair is expected to mimic the Eur/Usd


Eur/Chf: I expect the pair to keep retesting the floor unless the SNB does
something new.
Usd/Jpy: the threat of Intervention is always there.