Thursday, May 26, 2011

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.