S&P500 short-term: Trendlines to watch

Last post called for a correction, and we got another 3-waver, a tiny one though. Yesterday, prices broke out of the very short-term downtrendline, and thus headed higher to test 1192. Was too busy with my day job to publish an update this time. :)

Trendlines to watch

Check out the power of trendlines! A week ago, i drew the tentative parallel trend channel (in red). Guess where the prices bounced yesterday - exactly on the lower channel line. That point also coincided with the uptrending line of the triangle (purple). These trendlines now become important in terms of looking for a short-term significant top.

A sustained break above 1192 may target the 1210 level, close to my medium-term top target of 1220. A rejection has support at the above trendlines, at least initially.

Profited modestly from my triangle scenario. Am comfortable watching the fun from the sidelines, looking for the next setup. Market's always there for us, no hurry. All the best!

Hang Seng Index Short-Term: Overhead Resistance

5 weeks ago, i posted this chart of the Hang Seng Index (HSI), suggesting an Inverse Head & Shoulders with a target of 22000.

Here's what it looks like now:

Yesterday's session, HSI hit a high of 21935, close enough. Although it may inch higher towards 22000, expect consolidation here below the downtrendline connecting the two previous highs. Good support is at the bottom of the range around 20600.

More upside?

Look out for an eventual breakout above the line in the weeks/months ahead. This is due to the correlation HSI tends to have with Shanghai index, and the bullish medium-term outlook for Shanghai. Also, keep in mind the possibility that the decline from the highs was in three waves. Hence, when it does break out, we can expect a retest of 23100 and possibly new highs.

I'll post again as the price-action unfolds. All the best!

S&P500 short-term: Correction Ahead

Last post called for a thrust target of 1195, out of the triangle pattern, and suggested caution going long. Well, the message remains the same, and we can expect a sharp correction ahead within the next couple of sessions, if not immediately.

Price hit a high of 1192 in the last session, not quite the target, but close enough. We could inch higher here, but definitely not the place to stay on the long side, for the rest of this week. Obvious support is at 1154. Still looking for one more high towards 1220 after this correction, but i will post again after watching the extent of the correction.

Asian Connection
On a related note, Hang Seng Index has reached its target area of 21900-22000, and Shanghai is close to 3200. All signals pointing towards headwinds for world markets. I will post an update on the Asian markets soon.

All the best folks!

S&P500 short-term: Good news is usually bad news!

Last post: S&P500 Thrust Ahead! called for a thrust up out of a triangle. We did get a nice spike up to 1181, followed by a back-test that was deeper than expected. While still maintaining the rough target of 1195 in the near-term and 1220 in the short-term, i would urge caution going long here.

Reasons for Caution

Refer to the hourly chart-below.

1. Price close enough to uptrendlines to allow a break anytime.
2. Triangles precede the final upmove of the wave they are in.
3. Overbought levels + Negative divergences on daily chart.
4. Good news seems to be trickling in from the economy - markets go up on bad, at this stage!

No hurry to go aggressively short, without confirming price action. A correction here, has multiple supports, and hence will take time to do any serious damage. Easy long money has been made. Expecting rising volatility, with a generally rising market into may. Watch out for sharp moves down and reversals, as we go about forming a medium-term top into next month.

In the very short-term, the decline from the thrust was sharp, but in 3-waves. Hence, expecting some consolidation below 1181 before a break upwards. On the other hand, a break below the uptrending lower line of the triangle on the 5-min chart, would make a test of support at 1154 likely.

At the risk of sounding too obvious - remember, the market is always right! All the best for the week ahead.

Shanghai Composite Long-Term Count

This post is in response to a request from one of the readers: the count for Shanghai Composite since the Oct08 top. Attached below are two long term charts.

Long-Term - Bearish

There isn't enough data for an even longer term count. Judging from the nature & depth of the correction since Oct'08, a wave 5 of larger degree was most likely completed at 6100, and a five wave impulsive decline followed. Notice how the decline fits neatly into a parallel trend channel. Naturally, we should expect waves B (up) & C (down) to follow. We're currently in the B wave up since Oct'09. Not expecting any new highs on this upmove, and should be moving down to test the lows in a C down within the next couple of years.

BTW, for EW buffs, SSEC seems to be making a habit of extending the 5th wave. Can you spot the two instances in the chart above?

Medium-Term - Bullish

This B wave up since Oct'09, itself should ideally consist of 3-waves A-B-C (Markets are fractals in EW theory). About a month ago, i identified a triangle B of B sideways, with a C up to follow, with an initial target of around 3900 (coinciding with the 50% retrace level).

Short-Term - Neutral

Refer to this earlier post. Heading towards a target of 3200 in D, before turning down in E.


If you're confused with all the lingo above, i'd recommend this basic elliott wave tutorial, or the elliott wave crash course video. It's free, but you may have to sign up for a free club membership, which has comes with other benefits.