Well the lower wedge trendline that I posted on Thursday night did mark Friday's low. However from the afternoon action it looks clear that it is not a wedge, but is instead an ascending triangle. 

An ascending triangle has a 70% chance of breaking up., and that has to be increased by our going into opex week. If we can break the solid resistance at 1080, then the target for the triangle is 1097 with a 75% chance of reaching it:

That chart looks pretty bullish in the very short-term to me. Positive divergence on RSI & MACD, stochs still pointing up, the main declining channel broken, re-entered and then a close back above it. There is also an internal trendline that I have marked in black dotted line that has been broken and successfully retested.

If it wasn't for the treacherously quicksand-like feel of the market at the moment, I'd be very confident of significant upside next week, though the potential head and shoulder pattern building on Thursday and Friday within that ascending triangle is also worth a mention. In the event that we see a downside break out of the triangle, the H&S target is 1045 SPX (cash).

EURUSD has failed to make much headway since hitting the channel bottom on Friday 5th, and is still confined within the broadening descending wedge that has defined action for three weeks now:

The lower trendline wasn't hit on Friday, which doesn't tell us much as there are both bullish and bearish interpretations for that. The bullish take is that a partial decline in that wedge suggests an imminent break of the wedge to the upside. The bearish take of course is that we will hit the bottom of the wedge on Tuesday or Wednesday. Not much help there.

The copper chart nicely sums up where I think SPX looks to be now.  A rise to the top of that channel and then a resumption of the powerful downtrend. Worth keeping an eye on this one. I will be shorting it:

Update: The AKS call spread from last week has not worked out so far as it is down considerably. However there is plenty of time left in this trade as its an April spread so you can either sit tight and wait for the bull flag to be resolved or dump it on a close under the 20 day ema near 23.

Also the RIMM trade I highlighted a few weeks ago finally triggered this week as RIMM busted out into its overhead gap into the mid 70s. The trade here was to buy the April 75 calls and they are up nicely so now if you want you can sell half or just convert it into a call spread but selling the April 80 calls to cap your upside.

As for a new trade I am anticipating this market to pullback during expy week since its just so overdone and up at monster resistance. I would expect at least a 3-4% pullback in the coming weeks. 1120 in the SPX is nice support to expect if we retrace. One stock I am watching alot these days is AMZN and it has had a nice run from the 115 area to 134 recently. I think it is prime for a pullback if this market comes back down to earth. The daily candlestick on friday has opened at a high and is down almost 3 dollars at the low of day looking to close near here. That is a bit of a bearish topping candle.

Sell the April 135/140 call spread for 1.70

This credit spread makes money if AMZN is under 136.7 by April expy and maxes out anywhere beneath 135. You may also just close it out early in the next few weeks if AMZN has a decent retracement. I would exit the trade if AMZN closed above 135 for two straight days to manage risk.

Last week the market reacted positive to the jobs report to end the week on the highs near 1138 on the SPX. The action impressed me as I had been thinking all week we were going to retrace if not rollover but the sentiment out there continued to be overly pessimistic and in the short term that's all the market needed for fuel to edge higher. With the market this close to the Jan highs I would think they get tested this week or that would be too easy maybe? It is definitely not the time to be starting long positions and I think we are very likely to get some sort of pullback this week as there are several gaps down below here, namely the one near 1105. All gaps get filled on the ES. Of course the momentum may still remain to the upside but I just doubt we make to new highs without some sort of double top at first and then consolidation. Markets usually don't usually don't break out right after running for 4 weeks straight.

Another interesting thing about the 2010 price action I noticed is that the correction in late Jan took only 13 days while the move back up we have seen so far has been 20 days. We are nearing twice the "TIME" it took to correct and we still have not tested or broken the 2010 highs. When it comes to time cycle analysis it is usually is saying that the the trend that takes twice as long is the struggling trend. Nevertheless the market has held in there so it should be interesting to see how it acts in the next few weeks going into March option expy.

Econ data this week is light with the highlights being at the end of the week with usual jobless claims and business inventories. There will also be a few treasury auctions this week for 3-yr, 10-yr, and 30-yr notes.

Currencies- The Euro has been consolidating in a sideways pattern between 1.345 and 1.37. It does look like it could make an attempt to pop up out of the channel and test as high as the 50 day ema near 1.39 but the odds are that the trend down will resume and make new lows in the near future. The dollar index has looked a bit tired lately and is always just the opposite of the Euro. When I look at the dollar I see more of a bull flag consolidation rather than a topping pattern. For that reason I tend to think the dollar heads higher and could see 82 soon. The GBP/USD is still weak and rallies should be sold in this pair. The commodity currencies including the AUD/USD have been strong lately but look to be losing some momo this week and that could be an early sign to watch for a pullback in the energy and metals futures. Especially if the Aussie breaks below the 0.90 level.

Commodities- Oil has held up strong and could either be at the top of the long term channel we have seen or it could be getting ready to breakout of the low 80s and head towards 90. I kinda doubt it will break out right now but I have been wrong on oil lately so go figure. Copper does continue to look toppy to me and 3.45-3.50 is monster long term resistance. Gold had a nice week last week and could go higher as long as it holds 1120. I tend to think gold will be in a sideways pattern for the next several months. Finally, the grains had a ugly week and it looks like wheat, beans, and even corn are headed lower as the charts in these names look very vulnerable.

Buy the dips>> RIMM, RYL, V, AKAM, MGM

Sell the rips>> FCX, RL, RIG, WFR, DSX

Update: The HOG call spread we got into last week at 56 cents has worked out and is now at 92 cents as of this morning. Up 64% in one week. Not too shabby. The max this spread can be worth is $1 at March expy so it might be penny foolish to hold on for those last few cents. But at the same time its in the money now and time is on your side. Prudence would say take it off.

 (AKS) has rallied nicely this week with the steel and commodity names. The chart also looks good with a coming test of resistance up near 26. There has been some bullish options volume in this one recently as well. The type of action shows big money bidding up near term options and raising the implied volatility in these months whille selling the back month options thus decreasing the IV of the leaps. Generally when this is done in a biotech it signifies a coming catalyst or binary event. In other sectors it screams buyout. Of course it is only a clue but the volatility skew present in this name compares to the same MIL looked like before the takeover bid. 

To take advantage of a bullish chart and maybe more we can buy a call spread in April.

Buy the April 25/30 call spread for 1.40.

The max this can be worth is $5 and you should be willing to risk at least down to 70 cents.

Well we broke out of the declining channel on SPX today, and for me that was confirmation that we are in a wave 2 rather than a wave 3 as most EW chartists had thought:

 It isn't clear what form the uptrend is taking yet. I have put in the two main options, which are broadening ascending wedge, and a tight rising channel. As you can see from the dotted line on the wedge, I'm favoring the wedge for the moment.

The key targets here are SPX (cash) 1097 for the 50% fib retracement and 1110 for the 61.8% fib retracement. 

There is an elephant in the room here though and it is EURUSD:

EURUSD bounced off the bottom of the declining channel last Friday, and it has made some progress up since, but it has failed so far to escape the broadening descending wedge that defined the last decline.

Now if it breaks out to the upside, we will return to the top of the EURUSD channel, and SPX will at minimum test 1100, and may well make it back to the 61% fib at 1110.  If on the other hand it fails to break out we will probably just chop about until EURUSD reaches the bottom of the channel, at which point things will start to get interesting again.

EURUSD needs to make it back to 1.38. If it can, then it should make it back over 1.40 to the top of that channel. That would mark the end of the SPX retracement and the SPX can then drop into oblivion in the next wave down. It is the key marker that should give us the SPX top.

Until EURUSD makes it out of that wedge though, there is a significant risk that this wave 2 could just peter out and we drop earlier from a less predictable  level.