Friday, May 21, 2010

Hang Seng Index: Trendline Watch

Torn between the East & the West, and as the gateway to China, Hong Kong has had its own unique culture. This behaviour is often reflected in the Hang Seng Index. Leaning more and more towards Shanghai in the recent past, it has been trending sideways. Just like the SSEC, a short-term bounce may be in the offing.

Medium-term, the chart has the potential for a bullish Inverse Head & Shoulders, and looks decently setup for one more wave up. That scenario requires a break above the upper trendline in light blue within the next few months. In the very short-term, prices may exhibit more weakness towards 18800 level, and bounce up to test 19400.

Sustained weakness below lower crucial support of 17500, will change the picture to Bearish. Watch Shanghai & watch out for future updates.

All the best!

(Video) Robert Prechter on Tech Ticker

First part of a 3-part interview with Robert Prechter, president of Elliott Wave International. Some of his market calls may have been historically too early, to the chagrin of short-term traders. Let's face it, no one can predict the future 100%, unless you work in God's office (even then, it would be insider trading - a terrible sin!).

But, i've got enormous respect for this guy - especially his socionomic observations, and medium-long-term market calls. Enjoy!

Part 2 - Gold is no Safe Haven
Part 3 - Finance: Bank Reform Will Shrink Credit, Kill the Economy

Tech Ticker Article on Yahoo.

Thursday, May 20, 2010

S&P500 at "neckline" support

The dramatic plunge in the beginning of this month, changed the  view to medium-term bearish on the SPX. About 10 days ago, the below chart was posted calling for a reversal to retest the lows:

Price hit  a high of 1174, then turned down impulsively as can be seen in the chart below, once again below the 200-day moving average. That drop to 1065 has scarred investor psychology, fat finger or not.

A weak bounce to 1100

SPX is now oversold on the daily, and close to "neckline" support. Expecting a bit more downside into the mid-1060s, and then possibly a weak bounce. This formation does not look like a conventional H&S, in that the right shoulder happened in a jiffy! Initial upside resistance around 1100 (also the 200-day M.A). Let's observe how it moves.

A break below the neckline might yield 900-950 levels, especially if it happens after a bounce or a period of sideways movement, to relieve the short-term oversold condition. Most likely, the reverse of the past year is going to happen here: overbought & -ve divergences will be sold, but oversold & +ve divergences may be ignored!

All the best.

Wednesday, May 19, 2010

Shanghai Composite Very Short-Term: Due for a Rebound

Last post on SSEC labelled this decline as the last leg of a zig-zag correction, with one more wave up to come. While we wait for that possibility to present itself, a very short-term rebound should be on the cards. One of the support levels identified in that post was 2520, and price just reached that area. 

Note the +ve divergence(green) on the RSI, with daily & weekly oversold conditions. A break out of the narrow channel will confirm the rebound. Immediate resistance in the 2640-2700 area. Solid resistance above that is around 2900.

The declining volume on this very sharp decline in price, lends support to my medium-term view calling for one more wave up.

All the best!

SENSEX: Trendline break!

Last post on the SENSEX, mentioned that "a decline here would be nice". Well, based on recent action, that wish may be about to come true!

After the euphoric rise from the lows, prices have been trying to clear the serious resistance area of 18000, without much success. A few sessions ago, there was a break down of an uptrendline (highlighted in pink). Although too early to tell, prices may correct some here, presenting good buying opportunities IMHO.

Very Short-Term Oversold

In the very short-term, 5 waves down look complete with oversold indications. This could result in a sideways-to-upwards shuffle for a while, before another leg down.

Support Levels

Minor support from bottom channel line, is around 16000. As mentioned in the previous post, strong support around 15500/14600.  A break below them might lead to a gap-fill down to 12200

A sustained break above 18000 at anytime would indicate a continuation of the uptrend.

All the best!

Sunday, May 16, 2010

S&P500 Long Term Chart Update

On Mar-21, i published "S&P500 Long-Term Chart: Sell in May?", suggesting a target of 1220 on the SPX, based on an upper parallel trendline from the year 2000 high, and the 61.8% retrace level. Should've listened to myself - it turned out pretty much spot on! SPX reached a high of 1219.8 on the 26th of April, followed by that dramatic plunge in May.

Here's an update of the same long-term chart:

Price kissed the upper trendline, and reversed. (Note that this chart does not register the intraday low of 1065). Last post called for a retrace into the 1180 area, before a U-turn. SPX only reached 1174, and is now threatening to break down below the uptrendline. Whether this is an a-b-c correction of an impulse, or an impulsive start of a downwave to new lows, remains to be seen. A rapid descent from here, would point toward the latter case.

Huge Head & Shoulders!

The 15-year chart above, provides a pretty good glimpse of a huge Head & Shoulders in the making. If it materialises, the target we're looking at is unimaginable(at this point), and more or less confirms Robert Prechter's bearish wave prognosis. I'll leave the target calculation to you. ;) He does in fact mention a long-term H&S pattern on the DJIA in his April Theorist, which is available for free for a short period. Click here, or the banner above. Of course, this is just a possibility, and will become less likely if we break above the red upper channel line.

Alternate - Megaphone Pattern?

An eventual break above the red trendline, after this medium-term correction(if it is that!), might lead to a retest of all time highs, and setup a Broadening Top or Megaphone Pattern as illustrated below (see the top blue line on the chart above). With all the currency printing presses in overdrive, we cannot rule this scenario out. In the long-run, markets will still fall - only harder!

In the very short-term, support is around 1100 area. All the best!