XJO Slips To Begin March

The XJO finished February strongly to cap another winning month, its third in a row. Despite Friday's loss, the index has now returned 9.40% YTD. The monthly chart shows a possible symmetrical triangle pattern, where the XJO looks to be testing resistance with a possible breakout target of the 61.8% retracement level of 5,408. However, when extrapolating out the trendlines, the apex of the triangle is still one year away. Price action could easily still be constrained within the confines of the triangle for some months to come.

The weekly chart shows a healthy break of the 50% retracement level so far, with 4,962 providing support to the current uptrend. MACD levels remain fairly elevated and if a correction ensues, we could quickly see a break below 4,962 again. Bulls will want to distance current price action further away from 4,962 - a move towards 5,200 would provide more short-term comfort given the historical resitance that 4,962 has provided since 2009.

The daily chart shows price levels testing the overhanging downward trending resistance line from the all-time highs. A small wedge is up ahead for next week meaning a possible decisive move, and we see two possible scenarios playing out: (1) the long-term resistance gives way and prices elevate towards 5,175; or (2) long-term resistance wins out and the current uptrending channel originating from November 2012 breaks down. We would lean towards scenario #1 as the 20DMA will provided added support for the uptrend. Stochastics have seemed to reverse off of the 50% level sharply, and the parabolic rise back towards overbought levels may spark higher moves. MACD remains steady despite the negative divergence from the signal line, which may be erased soon.

The hourly chart shows a break to the upside from the descending which formed last week. However, price action has failed to reclaim levels within the uptrending channel. 5,075 provides support for now, and any moves higher may continue to be suppressed by the channel's support line. Bears will want to see 5,075 lost early next week to set up a move back to 5,000.