S&P500: Wave 5 underway

Last post on the SPX called for another wave up to finish this medium-term rally. Wave 4 is most likely complete with last week's sharp rally. We are now at recent highs once again, and can expect some consolidation. A breakout above 1227 will turn it into a support level instead, and offer a near-term target of 1255. Also, lookout for the upper trendline of the wedge. I will be posting the 15-year spx chart at an opportune time in the future.

Sentiment - Reason for Caution longer-term

While the rally and recovery news fills investors with optimism, it may be prudent to take a look at the longer-term picture here. If the 2008-09 decline was impulsive (in 5 waves), - and this is the view of the folks at EWI - we're currently looking at wave C of an A-B-C style rally. This is likely to be followed by another impulsive decline to re-test the lows.

Here's the sentiment picture. Compare it with the highs of 2007, and you will see that we're not far.

All the best!

Vietnam may go Vertical.

The HO chi minh Stock Exchange (HOSE), after its euphoria rally of 2007 towards 1175, gave it all up in the next couple of years. As the world recovered in 2009, the HOSE rallied in Wave A to the 600 level from its low of 250, a 38% retrace. As seen in the chart, a lengthy triangular Wave B consolidation followed, retracing almost 50% of the rise. A medium-term bull market in Wave C might be right ahead, to retest the Wave A highs. Longer-term, the HOSE is in a bear market and is likely to re-test the lows. A sustained break below the lower support line will negate this scenario.

H&S in H&S?

Head & Shoulders in Hang Seng & Straits Times Indicies?

Last post on the Hang Seng, called for a rebound towards 21600 based on the suggested parallel channel. That's exactly what transpired, and the index did a quick about turn as of Friday's close. The Straits Times Index is executing a similar pattern, which has potential for a short-term Head & Shoulders top. However, note that the RSIs are still relatively oversold on the daily chart, and right shoulders not fully formed in symmetry. An eventual move below the necklines, if it does happen, will offer targets just under 21000 on the HSI & around 2910 on the STI. A break above the shoulder line will negate this picture.

Hang Seng Index V Short Term: Update

Last post on the HSI suggested that an impulsive decline was likely complete, & a Corrective Rebound towards 23600 was due. We did get a whimper of a rebound up to 23275 but failed to close the gap. At the close HSI breached the previous low of 22800, suggesting more downside.

However, there could be support here just under 22700 based on the parallel channel, as suggested on the chart. Also note the very short-term oversold condition. An overlapping & messy rebound towards 23600 is likely to set up the right shoulder of a Head & Shoulders pattern. Look for a break out of the downtrendline in blue, and a break above 22800 as clues.