S&P500 powers into 1300 range

The S&P500 index found support at the 200-day moving average, as suggested in my last post, and has powered above the sticky 1297 level. This a short-term bullish development, and may carry enough momentum to target 1335, possibly with a pit-stop around 1315-1320 range. Very short-term, indicators are overbought, and may result in a back-test of 1297, or sideways action.

Shanghai Composite Short-Term: Positive Divergence

Just a quick note to highlight the positive divergence in the Shanghai Composite, as well as the Shenzhen Index. In recent past, such divergences have resulted in a significant rebound. The upside target at the moment is capped at 2750 for the SSEC, and 1135 for the SZSE. However, as noted in the previous post, if the medium-term triangle pattern was indeed broken last week, i would be careful with any longer duration trades at this stage.

Shanghai Breakdown, Hang Seng Update

Shanghai Composite broke down through the bottom line of the big triangle. Although oversold short-term, this is a medium to long-term bearish development. Immediate support is around 2580. We will have to monitor if the break holds over the next week or so, and derive reasonable targets for the downtrend if it develops.

Similarly, Hang Seng has broken below the 22400 level outlined in the earlier post and deteriorated rapidly. Currently oversold with a weak RSI divergence and sitting on the bottom of the channel. Looking for a rebound to test the 22400 level in the short-term

S&P500: Reaching 200-day Moving Average

The S&P500 is reaching the 200-day Moving Average(green) around 1250. Coupled with the previous low(labelled a), it is a likely region for a bounce. In case of a failure, good support is the previous high of 1220. Note the suggested corrective wave count, implying possibility of further upside in the medium-term. For now though, any upside should be limited to 1300 range.

Singapore Exchange & The Straits Times Index

SGX - Set for a bounce?

Previous posts on the Singapore Exchange (SGX), speculated on my bearishness on the merger as well as the stock price.Since my last post noting a break in the uptrendline for SGX, prices have declined, attempted a back-test, and declined again. A technical bounce is likely for the SGX here, around $7.20. Supporting this view are the declining volumes and the RSI divergence. A sustained break below this level on increasing volumes will negate this play. Upside is limited to the $7.70 pivot initially, or the downtrendline(blue) whichever comes first.

STI - At support, but no reversal signals yet

On the other hand, the Straits Times Index (STI) has not thrown up any reversal signal yet. But price is at a decent support level here at 3040. With weak global cues going in the summer holidays, it remains to be seen if STI can muster enough buyers to move up towards 3120. Further support is as shown on chart.

All the best!

Hang Seng Index: Reaching Friendlier Grounds (22,400)

The Hang Seng Blitzkrieg upwards from two weeks ago, met with stiff resistance at the Russian front. Confined to its range, the HSI got beaten back to friendlier territories around 22,400 - a formerly reliable support level. Can it reload and resume it's campaign upwards, or will we see a Normandy-style rout and capitulation? This level is key. With Shanghai starting an oversold bounce, will the HSI follow? Watch the panzer divisions (big hands) for clues.

(Video) Fight of the Century: Keynes vs Hayek

Part 1

Part 2

Shanghai Composite: On Life Support

"Charging Defibrillator - Stand Clear. One, two, three... Clear!" Shanghai Composite has gone critical in the past few weeks, approaching the bottom trendline of the very large triangle illustrated in older posts. This uptrendline coupled with the 2650-2700 zone might very well be the Life Support it needs. Looking for a rebound here back into the safe zone upto around 2830, and possibly the upper trendline later. An eventual break either way out of this triangle, will be the difference between a rehabilitation or a coma. Like a good doctor, continue to monitor the vital signs - price action, volume, oscillators and trendlines.



SENSEX: Reaching Support Zone

Bombay SENSEX is reaching oversold levels on the daily, while approaching the support zone between 17400-17800. Expect to see some kind of rebound here in the short-term. It is too early to call an end to the correction here. Further updates will be posted as the chart develops.

Hang Seng Index: Trendline Watch

HSI has stayed in range since the last post, in which a possible breakout was suggested. Respecting 24500 to the upside, while drawing support from 22400. Hence a nice trade will be in play once it breaks either side of this range. In the very short-term, HSI is oversold on the daily with a slight divergence, suggesting a rebound rally of sorts(which has already begun.) Also of interest is the lack of volumes on the recent decline.

S&P500 Failed IHS & Downtrend Channel

Not long after the last post, SPX broke below the proposed 'neckline', and hence invalidated the Inverse Head & Shoulders.This is a bearish development. The only consolation for the bulls is that the downtrend remains in a Corrective channel, and has not yet developed Impulsive characteristics. In the last few sessions, a positive divergence developed on the hourly, resulting in a relief rally.

The good news for the bears is in the chart below. The recent declines also broke the uptrendline of the rising channel (blue).

Can you count 5 waves up from Jul-10? As outlined in an earlier post on the DJ World Index, are we staring at an end of this uptrend? For a downtrend to take root, selling activity needs to pick up pace right here with better volumes.

For the moment, short-term upside is capped around 1330. A continuation of the uptrend requires a break above the downtrend channel.

S&P500 IHS Update

The previous post on the S&P500 identified an Inverse Head & Shoulders pattern with a target around 1430. Also suggested was the dangerously overbought condition short-term, and the possibility of a back-test. Since then, price has whip-sawed in a corrective downward pattern, and is poised crucially. Here's the updated hourly chart.

As you can see, price has managed to stay mostly above the neckline, and is now poised at the uptrendline connecting the prior lows. The indicators offer no help as to the direction at the moment, but if we are to keep with the trend in place, expect a sharp move up towards 1430, to validate the IHS. Alternatively, a breakdown below the neckline, invalidates the IHS & sets up a bearish picture.

All the best!

S&P500 Inverse Head & Shoulders: Target 1430

That's a pretty neat-looking Inverse Head & Shoulders (IHS) Pattern on the hourly! Although a IHS pattern is seen more often at bottoms of downtrends, they do occasionally turn up uninvited. A target of 1430 can be calculated based on the chart. Severly overbought on short-term charts, there is a danger of a pull-back, and hence chasing price here would be unwise!

Itching to get LONG?

If you are not long already, wait for a successful back-test of the neck-line, or at least a pull back to wind down the RSIs. That will enable employment of appropriate stop-loss points in the event of a failure.

Significant TOP around 1430

Last update, we talked about dangerous levels of BULLISH sentiment, as a contrarian indicator. Take a look at the weekly chart above. I believe we are approaching a significant top around 1430. There are three reasons to support this proposition:

1. Inverse Head & Shoulders Target level as shown above
2. Serious congestion zone from 2007-2008, just before the wave 3.
3. A Fibonacci 1.38 extention level is reached at this level

All the best!

Shanghai Composite: Retreating towards 2850

Shanghai Composite hit the upper trendline of a broad triangle pattern (refer to previous post), and promptly turned down. Selling has picked up pace somewhat,but has support around 2850 - a level also supported by the rising trendline, as shown on chart. In the event of a bounce, resistance lies around 2950. We will review this picture in case of a break towards 2650.

S&P500: Sentiment fires a WARNING shot!

As the S&P500 wavers at rally highs, bullish sentiment is reaching dangerous levels. Even if not an immediate sell signal, further price rises will be hard to come by until the bullish sentiment subsides substantially. Here's the SPX500 trendline watch, as well as the sentiment chart.

Shanghai Composite: A BIG Triangle = A BIG Move ?

Since its dramatic recovery in Wave A, the Shanghai Composite has been stuck in sideways action for almost 2 years in B-wave action, providing good short-term trading opportunities. We've talked about a possible truncated Wave C in previous posts. Meanwhile though, a BIG fat triangle has set up, and price is currently approaching the very important top line. A break above will have immediate resistance around 3180, but in the longer run could lead to much higher prices in an overdue Wave C. In case of a turn-down, support is at 2650, followed by bottom line. Eitherway, we may be looking at a BIG move, and hence patience is a virtue!

Hang Seng Index: Consolidation before a Breakout?

Since my last post Hang Seng Index: Break Down!, HSI has successfully held support around 22400. Looking at the weekly chart, the index has seen sideways action for the past 5 months, and is reaching the upper trendline resistance yet again, around 24000. We may see some consolidation here. However, the volume patterns suggest that a breakout above is possible in the short-medium term. Intial target will be 25000, followed by the significant pivot of 26300.

Straits Times Index: Facing a Familiar Foe!

After a rapid recovery from an oversold positive divergence, the STI is now facing a familiar foe: 3120. Also in play is the top of the downtrend channel. Interestingly, the decline in the STI has occured in 3 waves so far. A break above 3120 here, will mean at least a re-test of the highs in the medium-term. On the other hand, a breakdown to reach 2900 will complete 5 waves, and change the outlook decisively.

DJ World Index: Through the Elliott Eye!

The world has had an incredible year so far, with misfortune striking many diverse populations, in the form of natural disasters. I believe it is our duty to lend our support, relief and prayers to those affected, to the best of our abilities. 

Are we about to witness a financial disaster as well? Attached below is a chart with a simplistic view of the world index through my Elliott eye. If the labelling is foreign to you, you may want to browse through this basic Elliott Wave Tutorial. If you use a magnifying glass, you may notice a discernible trendline break on the chart. Note that the US markets have a heavy weightage in this index.

The question is: Is the C wave done? or was this 1 of C?
The nature of the decline that is currently unfolding might give us some clues. Assuming the most bearish case, i have drawn a projection of the possible path the world markets could take.

Big Picture

Since markets are fractals, any form of wave labelling requires the big picture count to be accurate. You may want to check out Robert Prechter's free copy of the February Elliott Wave Theorist for the US market picture, if you haven't already done so. (Available until Mar-21)

Asian Markets - baked in the same oven?

Although all world markets have general correlations, not all of them are in the same wave junctures. Some more bullish than others. For the Asian Markets big picture, you may want to check out the Asian-Pacific Financial Forecast service, by the brilliant Mark Galasiewski.

Very Short-Term

In the very short-term, most markets seem to be a few declines away from a short rebound into the next few weeks, which will serve as a back-test.

All the best!

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Shanghai Composite: Breakout Fails

Refer to last post on SSEC. A breakout above 2950, implied a target of 3180 after a brief back-test. However, the back-test failed (perhaps in sympathy with the extraordinary & unfortunate situation unleashed by mother nature in neighbouring Japan), and the short-term outlook is back to neutral. Supports are at 2850, then 2800. A break back above 2950 on good volume will give strength the bullish case.

Straits Times Index: Overhead Resistance

Last post on the STI - Dire Straits - identified a break below 3120, and called for further declines. After reaching a low of 2970, there was a nice rebound. The same 3120 overhead is now serious resistance. Expecting price to correct with support at 3050 zone. A possible inverse head and shoulders reversal pattern is illustrated on the chart. An eventual break above 3120 will make this an A-B-C style correction implying higher prices ahead.

S&P500 Short-Term: Update

Refer to previous post, suggesting a short-setup on SPX. Although, the 30-min RSI never made it to 70, price moved down swiftly, taking the lower trendline downriver. Around 1300 support, a nice back-test followed. If you've taken a short position, move your stop down to the back-test level to protect your profits. Failure of 1300 zone may result in 1275. This move down, if it happens, is likely to be choppy.

Shanghai Composite: Upside Breakout!

Last update on the Shanghai Composite noted resistance at 2950. After a decent correction, SSEC jumped up 1.8% today on good volume, and breaking out above this barrier. Target for this move up is 3180. But first, there may be a back-test of the breakout. Also, the medium-term picture will get very interesting around the target levels. Stay tuned!

(Video) Quantitative Easing Explained!

S&P500 Short-Term: Bearish Wedge

Not to swing at every pitch requires a lot of discipline. If one takes only the best setups, with a safety margin, one can't go too far wrong. (Sounds like value investing, doesn't it?!) The S&P500 maybe providing a short-term bearish opportunity. First, here's the Daily chart:

My last update noted a trendline break with support at 1300, and suggested that we might see a shorting opportunity. Since then prices have whip-sawed impressively, and failing at the back-test of the broken trendline. Thus resulting is what could be a bearish Rising Wedge, as shown on this 30-min chart.

Top of the wedge is at 1332, bottom is the rising trendline. A break eitherway could be bullish/bearish. But Elliott Wave Theory suggests that after an impulsive decline and a corrective upmove, there should follow at least another impulsive decline.

Strategy:

1. Taking a short-position at the top of the wedge, with RSI close to 70 on the 30-min chart(for margin of safety), with a suitable stop just above. In case of decline below the lower trendline, looking at a target of around 1275.

2. In case of a break above the wedge, i won't be taking any long positions until clear of recent highs.

Apple iPad2 Poll: Fibonacci in Action!!!

Was just browsing and in this poll on MW, the respondents exhibit an almost perfect Fibonacci ratio (Golden ratio), in response to the question! An almost perfect 61.8-38.2. A Coincidence you think? Or is it the law of nature in action? Keep in mind that the poll does involve a big "herd" of respondents, and it does involve speculation!!

Asia: Some Bullish Breakouts UPDATE

Refer to this earlier post entitled, Asia: Some Bullish Breakouts!, wherein some leading asian indices were highlighted, when they achieved breakouts to new highs. They have regressed enough to cancel the long trades. Moreover, all three charts have violated the uptrendlines, implying more corrective action ahead. Once again, this case highlights the importance of a stop-loss strategy before embarking on a breakout trade. Here are the updated charts, with suggested support levels.

1. South East Asia

 2. Malaysia KLSE

3. Korea KOSPI 

Singapore Exchange: Breaks Medium-term Uptrend

SGX breaks medium-term uptrendline, and also the 200-day MA. This is bearish action. Currently around $8.00 round number, and may offer a back-test of $8.25. Next significant support is coming in at $7.70. As SGX did not break downtrendline since my last post, no long position was taken. For those who did, i trust that stop-loss strategies were used!

S&P500: Trendline Break!

In my last update around 1325, we discussed the possibility of a correction upon hitting the upper trendline. After threatening to break above it, SPX has crash-dived lower and in the process breaking the lower trendline. The degree of this decline is anybody's guess at the moment. Near-term, we have support at 1300 followed by 1275. Expect an oversold bounce to back-test the line, which may provide a shorting opportunity. Also note the location of the 50-day MA.

Shanghai & Shenzhen Update

Reaching Resistance Zones

Last update on the Chinese indices noted bullish breakouts, and i took positions short-term. Both indices are now reaching resistance zones, and may be vulnerable to a pullback here. Support for the SZSE is around 1230. A breakout above these zones will test recent highs. Note the increase in volume with the price. Will post bigger-picture chart when time permits.

All the best!

Shanghai Composite

 Shenzhen Composite

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Singapore Exchange: Decision Time

SGX has been drifting in a range since the merger-euporia-rally, and the high volume fall. From the arithmetic chart below, it is evident that a move eitherways in required. Currently sitting on previous support of $8.25 and the rising trendline, with the 200-day MA not far below, chances of a bounce here outweigh a decline - by a bit. I may go long here, with a suitable stop.

Upside targets: $8.70 initially, followed by $9.20
Downside support: 200-day MA initially, followed by $7.70

Remaining bearish on the long-term picture as well as the merger. All the best!

Straits Times Index: In Dire Straits

The Singapore Straits Times Index broke down through range support at 3120 today. Since the break of the long-term uptrendline (blue dotted) - a bearish development - this move down was in the works. Initial support may be provided by the bottom of the parallel channel(pink), followed by good support in the 3040 area.

In case of further bearish developments, an eventual target of 2900 will not surprise.

Shanghai & Shenzhen: Break Up!

In contrast to the HSI, Shanghai(+1.6% today) & Shenzhen(+2.9% today) seem to be breaking upwards on decent volume! In my last post, i had suggested that the decline in the SSEC was looking corrective implying a break upwards is possible. I am very short-term bullish, but still wary of the barrier at 2950 & 1235, on the SSEC & SZSE respectively.

Shanghai Composite

Shenzhen Composite

Hang Seng Index: Break Down!

Last post on the HSI showed why we bounced up from 22,400. After a decent advance, the HSI turned down along with other emerging markets, and broke down through the uptrendline. However, as the index is reaching oversold towards the historical 22,400 support, expect a tiny bounce or back-test here. Further support is at 21,800. I will discuss other supports in the event of a further break below this level.

Meanwhile the Shanghai Composite is changing gears, and breaking out of its short-term downtrend. Update to follow shortly.

S&P500: Trendline Watch

I was looking for a termination of wave 5 just under 1300. The very overbought SPX refused to oblige and has climbed towards 1325, hitting the upper trendline of the wedge once again. Looking for a pause or significant reversal here. In the absence of the latter, there is a remote possibility that the 3rd wave is extending. Watch for a break of  either trendline. Always use stops.

All the best!

USD looking down the rabbit hole!

Last update on the USD saw a breakout out of the downtrend, and a struggle up towards $81, before trending down for a back-test of the uptrendline. Looking for a consolidation between the two trendlines. A sustained break below the lower trendline is long-term bearish for the USD, and thus bullish for commodities and stocks. Watch this chart!

GOLD: At Uptrendline

Was looking through some old charts, and bumped into this Gold chart. Was surprised to see Gold hit the target indicated (although the target was based on log scale). I donot trade Gold, but some of you might find this chart interesting. Price is approaching the uptrendline, with a bounce possible to retest $1400.

SENSEX: Reaching Support

Sensex had a little dance at the upper channel support, before sliding down quickly towards 18200. Good congestion support here just under 18000, likely to effect a bounce at least. A sustained deterioration below this level will see 16000 area.

Strategy: This is a BUY zone, with a stop-loss at 17500.

Shanghai Composite: Trendline Watch

Since my last post on the SSEC calling for a move lower, the index has fallen 8% so far, punctuated by some whip-saw rallies. The resulting structure looks like a overlapping descending wedge, suggesting corrective action so far, unless we see a sharp breakdown in the weeks ahead. A break out of the wedge may be short-term bullish, but until that happens, we're still in a downtrend.

Note that the entire decline has been on declining volume. Last couple of sessions, saw SSEC bounce off a minor trendline (maroon) on decent volume. Is this the start of a fightback? A significant support trendline (grey) exists further down just below 2600.

Short-term trade: I may be a buyer around the lower trendline, or on a break out of the wedge, with a suitable stop below my purchase price.