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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