KOSPI 200: Trendline Watch

Another long-term bullish chart here, in the Korea KOSPI 200 index. Prices broke out of the 200-225 range, but failed the back-test and also broke out of the parallel trend channel. It remains to be seen whether we have one more high on the cards, or this is the start of a medium-term correction. The former scenario may hold.

The chart is self explanatory - note how the trendlines trap the price beautifully. Over the past 2 years, the KOSPI fell in 3 clear waves, and recovered strongly, just like the SENSEX.

Wave 5 could have ended around 230. Alternatively, that was leg i of 5, and new highs are ahead. Initial resistance zone is at 244. Supports are as drawn on the chart, and represent good buying opportunities IMHO.

All the best!

Straits Times Index: Trendline Watch

The STI declined in 5 waves from its all-time high, which means an eventual re-test of the lows cannot be ruled out. Although the medium-term wave-count is unclear to me, here's the chart and trendlines.

Recent breakdowns were on strong volume, which warns of distribution. Any further upside in the near-term will likely be limited to max 3250. Most recent decline broke below an uptrendline(black). Expect near term support at bottom channel line(maroon).

Break below 2670 = Dire Straits!

Crucial level for STI would be 2670, a sustained break below will change the medium-term outlook to bearish. Further support is around 2520/2420.

All the best!

SENSEX: Trendline Watch

Those looking for a decent correction to buy into the Bombay SENSEX, have been terribly disappointed so far. The index keeps plodding higher and higher, and may retest all-time highs before any significant correction. Here's a look at the trendlines am watching.

Overall, the chart looks pretty bullish for the long term - potential Inverted Head & Shoulders, or Cup & Handle patterns all over. After declining in 3 complex waves from 21000 area, Sensex has rocketed skywards, and seems to have just finished/finishing some kinda wave 4 consolidation, at significant resistance area of 18000.

The latest decline from 18000 has been in 3 waves so far, rebounded right on an uptrendline, and looks set for more upside. A sustained break above 18000 will setup an advance towards the all-time highs of 21000.

A decline here would be nice!

Although unlikely, declines here towards strong support at 15500 would present a great buying opportunity. Also, it would setup a nice handle for further upside!

All the best!

S&P500: Stop sign at 1180

Equally swift rebound, retracing past 1150 & the 61.8% level! Last post suggested a H&S top in the making. The lines are drawn - connecting the neckline and the potential shoulders.

The top parallel line may meet price around SPX 1180, which is also the area of previous congestion. Thereafter, expecting a reversal down.

All the best!

Shanghai Composite: A Zig-Zag Correction

Shanghai Composite is in a medium-term upward correction of a long-term bear market. Evidence is in the 5-wave decline from all-time highs, which requires a ABC 3-wave correction upwards, followed by another 5-waver down. I believe we have completed wave A, and are in the B wave down, with a C up to come.

Given the 3-wave moves(within the blue B) & extended sideways behaviour over 9 months on declining volume, i proposed a triangle B wave initially. Seemed to be working out fine for months, until recently - when prices broke down through "normal" symmetrical triangle bounds. Although, a barrier triangle is still a possibility, i have changed the labelling to reflect the higher probability now - a zig zag complex correction.  

Price broke down through the suggested channel (cyan), implying more downside. Currently oversold on both daily and weekly basis, risk-reward favours the bulls in the very short-term.

Important levels to watch

Technically speaking - yes, an ABC correction can retrace the entire length of the prior advance. However, the probability of that scenario here is low, given the strength of the wave A. Here are the higher probability turn points:

• Obvious support at the previous low of 2640. Knowing SSEC's preference to extend in the final wave of its impulsive moves, i will not rule out further downside behavior.
• Next target would be in the 2520-2560 area (with 2560 being the 50% retrace of the A wave, and 2520 the w=y target.)
• In the unlikely case of further downside, 2340 is the 61.8% retrace of A, close to the lower tentative channel line on the chart.

Only at the end of this current correction, can a price projection to the upside be made, but at the very least expecting a retest of the highs.

Trade Management

As you are aware, corrective waves are notorious for their unpredictability, and are an e-waver's worst nightmare. It's all about probabilities & I'm no match for them either! You want to trade markets, you gotta erase & redraw your drawing board as often as it requires. Key to success is trade management, more than knowledge of the future. Every trader has (or should have) a trading style that is unique to him/her, which suits his/her personality. I donot provide trading advice. How you manage your trade is very important, and only in your control.

All the best folks!