Friday, February 26, 2010

S&P500 short-term: Back at the fork!

What started out as a bear feast at the open yesterday, turned instead into a bear hunt, and sent 'em scampering into the woods! We did break the uptrendline, and fell sharply to 1085. Then a sharp reversal to close the gap. Once again, very persistent market action - just like the Hang Seng Index in Asia, where i pointed out a possible bullish cup & handle in the making, a couple of days ago.

We're back at the fork in the road. This driver's confused. Made a dash for the bear road, did a smoking Michael Schumacher U-turn, and got right back to the fork.

So, what does the road sign say?

There's a lotta dust n tyre bits in the air obscuring the sign. While the oscillators allow a break eitherways here, i'm betting on the bullish route in the short-term. Hence i'm foolishly putting up my bullish wave-count. Note that wave 4s tend to have false breakouts below trendline.

Very short-term scenarios

a) A small spike up to 1105, followed by sideways-to-downwards action to unwind the oscillators into the weekend, and a possible breakout to the upside on Monday.
b) A sharp fall to below 1080, leading much lower. (Less likely, but never take a trendline break lightly)

Preferred scenario: a.
As always watch the price action & trendlines, place your stops.

Have a good Friday!

BTW, I really like Roger D's fractal view - a bearish scenario:

Wednesday, February 24, 2010

S&P500 short-term: Fork in the road

We did whipsaw up to 1105 today, which proved to be a formidable intra-day resistance. I believe the market is driving up to a fork in the road, and its gonna resolve one way or the other.

Bullish road
A decisive break above the trendline resistance currently around 1107, will catapult SPX to 1126 target (the target of a mini inverse H&S in the making), after which it may turn down for a while.

Bearish road
A hard fall to 1080 if we break below the rising trendline.

Watch the trendlines for clues. Seems like the momentum is with the bulls for now. Either way there's no escaping a decision within the next session or two!

All the best folks!

Tuesday, February 23, 2010

S&P500 short-term: Drop ahead UPDATE

My last post was around SPX 1110 level - called for a drop ahead. Prices have broken down to the 1090 area since, and bounced right off support from the rising uptrendline from 5 Feb.

For today, expecting to claw up along the uptrendline towards major resistance at 1105. This action will unwind the short-term oversold condition. Then, another drop to 1080-85 area is possible where you see the lower uptrendline. If so, this would be somewhat similar to the Shanghai action from 5 months ago.

Very short-term bearish. Short-term, am neutral to mildly bullish, unless prices breach 1045. Overall, watch the top & bottom trendlines for clues, and have a plan B ready.

All the best folks!

Hang Seng Index Short-Term: Bullish Cup & Handle Formation?

I may be a little early in calling this, but the recent price action has been persistent. HSI has been bearish for a while, but what troubled me right from the start, was the first wave down from the highs - a very clear 3-wave drop (W). Followed by what look like two more 3-wavers up and down (X & Y). A possible complex correction.

At the time of my last post, Hang Seng Index: Serious Resistance Ahead, we were approaching 20750. Subsequently, the market dropped to 19900 level, turned around and hit the resistance line again, generating an inverse Head & Shoulders pattern. However, as the market is short-term overbought, there was no breakout. I'm expecting a sideways movement before any break of the resistance line - possibly resulting in a cup & handle formation.

If my medium-term bullish scenario for Shanghai materialises, a breakout in Hang Seng would fit in nicely with D wave of  the Shanghai Triangle.

Target & Levels to watch

A breakout requires a convincing break above 20750. If it does so, looking at a target of 22000. The path will not be straight up of course .

On the other hand, we may just turn down from here, in which case support is around 19400. A break below will take us much lower.

Very Short-Term

For the next couple of days, expecting a sideways-to-downwards consolidation, inline with other world markets. Prices moving below 19800 level will make the cup & handle unlikely.

All the best, and your views are appreciated as always.

Sunday, February 21, 2010

S&P500 short-term: Drop ahead

Last week's post called for max upside of 1110 which is the 62% retrace level, then consolidation. Since then prices have reached and breached it, but only by a bit. Although, there is always the possibility that we may head higher to the 1126 level next, i'm expecting a drop here - probably even a sharp one!

Here's why:

1) Overbought at hourly and daily levels, and sitting right on the trendline
2) Negative divergences abound
3) Shanghai Connection

Shanghai Connection Update

If you're not already familiar, read this for a re-cap. Note highlighted area in the updated Shanghai & SPX charts respectively:

Although the form of the decline (looking like a 3-waver), and the subsequent rise are similar, SPX has already retraced 62%, as compared to SSEC's retrace of 50% only at that time. So, it's not an exact relationship. However, i propose that the psychology behind the moves is very similar. And so coupled with the other two factors mentioned above, we can expect a decline within the next few sessions, if not immediately.

Support Levels

Minor support around 1096. Depending on the slope of the decline, main support is the rising channel line from Feb 5 - could be around 1085. Next supports at 1060 and 1045.

In the very short-term, there could be a pop-up at the open based on Fri closing action.

As always, watch that steep rising trendline for a break before taking action & place stops to protect against any upside surprises. Good luck folks!