H&S in H&S UPDATE

Refer to my last post: "H&S in H&S?", suggesting an impending Head & Shoulders short-term top in the Hang Seng (HSI) & Straits Times (STI) Indices. Here are the updated charts.

The HSI has given up on 23600 after a bit of a struggle. Note the volume spike on the last decline. As the hourly is oversold - and we're at the neckline -, a short-term bounce is possible here. A break below the neckline on higher volume, will add strength to the H&S picture with an eventual target around below 21000.

The STI seems to be holding up better, and has not yet reached the neckline. Declining volumes are not high either. However, should this change, we're looking at an eventual target around 2900.

A break above the shoulder line will negate these scenarios. Remember, H&S patterns need not always work out. Weigh the probabilities, and place your stops accordingly.

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.

Hang Seng Index, Short Term: An Impulsive Decline

With today's 600-point decline to the 22800 level, HSI has completed what-looks-like a 5-wave decline, or in 'Elliott speak', an Impulsive Decline. It has now reached the most recent support area, and thus a likely point for a Corrective Rebound towards 23600-23800 level, which might materialise in a 3-wave overlapping format. Feel free to browse the Elliott Wave tutorial under 'Education & Resources' if the terms intrigue you. Here's the daily chart:

Head & Shoulders

If the above is indeed a 5-wave decline, principles of Elliott Wave Theory dictate that some form of corrective upward action is due, before another decline to new rally lows. Classical technical analysts might identify this as a potential Head & Shoulders pattern. It's still early days though. A break above 23800, or an immediate break below 22800 will make this less likely.

Other Asian Markets

Other Asian markets (such as the STI) seem to be executing similar patterns too. The SSEC's bullish medium-term picture is in danger of a truncation, after the impressive runup and the deeper-than-expected decline. It might be prudent to take profits on the impending rebound.

All the best!

S&P500 short-term: Breakdown towards 950-960

Last post on the SPX, outlined the price action then as bearish, with stiff resistance at 1100. Since then, the index has not looked back and continued down to break below the crucial 1040 area. Oversold manages to remain oversold, which reeks of bear market behaviour (remember how overbought remained overbought on the way up?). Let's take a look at the daily chart.

Medium-Term: Head & Shoulders Target = 860

Although, the right shoulder needed a bit more sculpting, it is close enough to be called a H&S, with volume confirmation. Hence, we are looking at a medium-term target of around 860. Of course, this is the ideal scenario, and the market has to oblige!

Very Short-Term: Immediate Target = 950-960,

This is based on the recent high of 1031, and the wave structure of the decline on the 30-min chart below, lends support to this target.

The decline so far from the B high has an impulsive look, and has completed 4 waves. Expecting one more move down to the 950-960 area, before a significant rebound.

Wave Counts

Maintaining the A-B-C count for now. If it is so, i expect the decline to end around the 950 area(within the corrective channel in red), especially if we subsequently break through 1040 upwards.

Instead, an extended consolidation remaining under 1040, followed by a sharp break below 950 would suggest we're in the alternate wave count suggested in the last post, with very bearish implications (Prechter point!).

The range now is between 950-1040. I await the latest sentiment readings - could provide vital clues in the short-term. All the best & stay safe!

S&P500 short-term: Rebound towards 1100-1150

Last post - S&P500 at "neckline" support, called for a weak rebound towards 1100, followed by a reversal down. Price rose in what looked like a 4th wave to 1190, then gapped down sharply in yesterday's trade to 1141. Based yesterday's strong action, hourly and daily oversold conditions & RSI positive divergences, a sustained rebound here is likely.

Initial rebound will encounter strong resistance at 1100, which is also the 200-day M.A. A sustained break above will target the 1150 area to setup a possible Head & Shoulders pattern. In the medium-term, a break below 1040, will target the SPX 900 area. This coincides with my view of a short-term rebound in Asian markets.

All the best!

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!

S&P500: Medium-Term Bearish

Almost two months of upside simply erased in a day - computer glitch or not!

Here's a daily chart of the S&P500, with a suggested count, and path projection. More importantly, both uptrendlines(grey & white) broke down, with no follow up effort to recapture. Price currently sitting just around the 200-day moving average, at oversold levels. A lot of short-term volatility is on the cards.

Elliott Wave Count

Primary count is corrective(bearish) up since Mar-09, with the alternate impulsive(bullish) count in [brackets]. If you recall, it was very hard to count the internals impulsively, during the entire uptrend. One of the reasons to consider the bullish case, is the extent of the retrace so far - 61.8%, surprising strength. Whichever the case, the medium-term view is bearish now.

Possible Head & Shoulders ?

A H&S top could be in the making, with LS at 1150, Head at 1220, and neckline at around 1060. Natural resistance around 1150 level might facilitate the RS. If it works out, we could be looking at 900 level in the medium-term. This is just one of many possible scenarios.

Asian Markets

Many asian markets are also breaking down from recent highs, will be posting an update on some of them next week. Shanghai has been in a extended sideways-to-downwards move for almost 9 months now, not quite following the SPX. Although long-term bearish, I believe SSEC is nearing the end of its correction & china bears will be disappointed (for a while). It will be the subject of the next post.

FREE Elliott Wave Theorist

EWI has just released the latest Elliott Wave Theorist (by Robert Prechter) for free. Click here or the banner above. You just need to have a club membership, which is free. I'd highly recommend reading it - a brilliant piece of research.

All the best!

S&P500 short-term: Impulsive Decline!

Thursday, the market showed surprising strength, and i remarked on a comment thread, that this might be an exhaustion gap on the small cap index. Friday, the markets were overdue for a correction, and would have gone down on the slightest excuse (Goldman or not!), and they did. The decline was impulsive suggesting more downside ahead towards 1176. We are surely at a significant short-term top, but whether it's a significant medium-long-term top remains to be seen.

Head & Shoulders

First thing to take note is the red channel break. Then, SPX got oversold, and bounced right off an important short-term trendline (purple). Price is forming a slightly declining Head & Shoulders, with left shoulder at 1200, head at 1214, and right shoulder at 1198. If it works out, we can expect a decline towards 1176 area initially. Good support is at 1150 area. A break of 1200 upwards, may retest the highs at 1214.

As an aside, RUT looks like it has a bit more upside to go.

Short-Term Trading Idea

I may take a short-position right here with a stop just above 1200, and a target of 1176.

Latest EWT

So is this the start of a regular correction at the end of wave 5, with more upside to come? Or is it the end of a corrective C of some kind, with serious declines ahead? The latest Elliott Wave Theorist, from Robert Prechter of Elliott Wave International, presents a very impressive, and comprehensive timing analysis going all the way back to the 1900s. Here's an article which drops a few hints as to the content. Without giving away too much, he explains the surprising strength of this "rally", why a very significant long-term top for US markets may be close at hand, and the nature of the declines to come. No one can predict the future 100%, but this newsletter is definitely worth a read. :)

As most of my trades are in the short-medium term, i'll stick mostly to analysis in these time frames. Will be posting again with an update of sentiment, and slightly longer-term charts, after watching the current decline. Meanwhile, keep in mind that the medium-term uptrendline is at the bottom of the chart (in grey).

As always, be safe and remember to use "protection". All the best!

S&P500 short-term: Fork in the road

We did whipsaw up to 1105 today, which proved to be a formidable intra-day resistance. I believe the market is driving up to a fork in the road, and its gonna resolve one way or the other.

Bullish road
A decisive break above the trendline resistance currently around 1107, will catapult SPX to 1126 target (the target of a mini inverse H&S in the making), after which it may turn down for a while.

Bearish road

A hard fall to 1080 if we break below the rising trendline.

Watch the trendlines for clues. Seems like the momentum is with the bulls for now. Either way there's no escaping a decision within the next session or two!

All the best folks!

S&P500 short-term: Alt Bullish consideration

(Image Source)

S&P500 bounced off the neckline off a H&S. Here's an alternate bullish consideration. We completed Wave A at 1080, and now we have a Triangle B pattern unfolding. If so, we've plotted a-b-c-d, and a small wave e to come, before a big C up, to new highs.

This view will be invalidated if we break SPX 1060 convincingly.

Possible?

S&P500 short-term: A complex correction?

Corrections by definition are complex creatures. They will toy with your thoughts and emotions, cause enormous whip-saws, and are generally not good for a trader's account balance! When the uptrendline from Friday broke down yesterday, i was looking for a tiny back-test and a swift drop to test the lows. Swift drop there was.. but quickly reversed off 1060 pivot for an extended back-test.



Suprising strength. In addition, Financials were holding up stronger than the broader indices - not a good sign for bears, as they tend to lead the way down in declines.

Yesterday's strength, coupled with the greens in asian markets today, opens up the possibility of a Triple Zig-Zag like structure, with a c of C upwards to come.

Head & Shoulders?

Have a look at the chart again. If we drop today to 1060, a Head & Shoulders (with a target of Friday's lows) could be setting up. Head is roughly where you see the 'A', and Neckline(not drawn on chart) around the 'B'.

Inverse Head & Shoulders?

A smaller inverse H&S could be setting up too in the very short-term. Look to the right side of the chart. This time, the head is where the 'B' is, and neckline at 'A'. Slight drop to 1065, then a break of 1071 would confirm it(with a target around 1084).

Not the neatest of patterns, but who knows. Isn't this fun?!

Trendlines for today

Watching the upper trendline resistance around 1076, and support from the new uptrendline coming in around 1065.

All of the above is very short-term. Medium-term, it's a downtrend. Good luck today!

Comments?

S&P500: Short Term target 1104

SPX broke out of short-term downtrendlines, and formed a nice inverted Head & Shoulders pattern. Short-term target for rebound: 1104. Its already more than halfway there. If it is a simple correction upwards, it should be followed by an impulsive decline below previous lows.

Watch that red trendline for a break.

Hang Seng Index: Consolidating in Wave 4

Hang Seng decline since 11 Jan so far looks like 3 waves down, and consolidating in Wave 4 of latest decline. Since Wave 2 was a zig zag, we can expect a sideways correction for this wave 4, in line with Elliot Wave principle of alternation. Expect a choppy wave 5 decline later next week down to 19000-19200 levels(the target of the head & shoulders identified in this earlier post.

Hang Seng Index: Head & Shoulders Pattern

Hang Seng broke through the neckline, target of around 19200. Looks like a Wave 3 or wave C underway. Wont rule out short rallies in between though. Expected a bounce shortly to test the neckline.