Hang Seng Index: Consolidating in Wave 4

Hang Seng decline since 11 Jan so far looks like 3 waves down, and consolidating in Wave 4 of latest decline. Since Wave 2 was a zig zag, we can expect a sideways correction for this wave 4, in line with Elliot Wave principle of alternation. Expect a choppy wave 5 decline later next week down to 19000-19200 levels(the target of the head & shoulders identified in this earlier post.

Shanghai Composite: Headed for 2700

Shanghai has broken a major trendline(red) from its Nov08 lows. So it will likely test 2700 level again (also 38% retrace of the entire uptrend). Just hit the lower channel line(blue) which is minor support. Can expect a bounce up to test the uptrend line before resuming the downtrend. This is inline with the short-term oversold conditions on HSI and SPX.

Just beautiful, how the price hugs the trendlines!

Hang Seng Index: Head & Shoulders Pattern

Hang Seng broke through the neckline, target of around 19200. Looks like a Wave 3 or wave C underway. Wont rule out short rallies in between though. Expected a bounce shortly to test the neckline.

S&P500: The Bear Returns in Jan 2010

No better way to start the blog than this:



While most of the world is busy talking about recovery, the S&P500 has spoken with a critical break of the trendline(red) which contained the uptrend from the lows of March 2009. There will be a short rebound as the price meets the support of the small trendline(blue), but eventually we are headed for the 960-980 range as a minimum, which is the 38.2% retrace of the whole uptrend.

As we zig zag on the way down, there will form more trendlines upon which i will base my forecast. For now though, watch out below!

Welcome!

Welcome to trendlines!

Here I hope to share with you the power of trendlines. Group human behaviour may seem erratic on a short time frame, but exhibits patterns and relationships in medium and long term frames. One of the best demonstrations occur in the stock markets, and can be observed via trendlines and fibonacci relationships. You can google 'fibonacci' for more information about this amazing concept. If you could chart any mass human activity, chances are that trendlines exist.

One of the pioneers of the 'patterned human behavior' concept was R.N.Elliot, the father of Elliot Wave Theory. Numerous websites on this topic exist too, including one by modern day Elliot Wave Theorist, Robert Prechter.

You will notice the URL of this blog includes the number 618. It is part what is known as the Golden Ratio (a fibonacci ratio). In my subsequent posts, i will try and demonstrate its existence in real life charts.

Do feel free to suggest, comment or criticize!